As filed with the Securities and Exchange Commission on May 7, 2020

Registration No. 333-237944

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1

to

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

INTUIT INC.

(Exact name of registrant as specified in its charter)

 

Delaware		7372		77-0034661
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

2700 Coast Avenue

Mountain View, CA 94043

(650) 944-6000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Kerry McLean

Senior Vice President, General Counsel and Corporate Secretary

Intuit Inc.

2700 Coast Avenue

Mountain View, California 94043

(650) 944-6000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Luke Bergstrom, Esq. Chad Rolston, Esq. Latham & Watkins LLP 140 Scott Drive Menlo Park, California 94025 (650) 328-4600		Mike Ringler, Esq. Skadden, Arps, Slate, Meagher & Flom LLP 525 University Avenue, Suite 1400 Palo Alto, California 94301 (650) 470-4500		Tony Jeffries, Esq. Wilson Sonsini Goodrich & Rosati, P.C. 650 Page Mill Road Palo Alto, California 94304 (650) 493-9300

 

 

Approximate date of commencement of proposed sale of the securities to the public:

As soon as practicable after this registration statement becomes effective and upon consummation of the merger described in the enclosed consent solicitation statement/prospectus.

If the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  ☒		Accelerated filer  ☐		Non-accelerated filer  ☐		Smaller reporting company  ☐ Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to Be Registered		Amount to be Registered(1)		Proposed Maximum Offering Price Per Share		Proposed Maximum Aggregate Offering Price(2)		Amount of Registration Fee(3)(4)
Common Stock, $0.01 par value		12,730,838		N/A		$3,455,022,125		$448,462

(1)	Represents the total number of shares of Intuit common stock, par value $0.01 per share to be issuable upon completion of the Merger described herein.

(2)

Pursuant to Rules 457(c) and 457(f)(1) promulgated under the Securities Act and solely for the purpose of calculating the registration fee, the proposed aggregate maximum offering price is the product of (x) $271.39 (the average of the high and low prices of the Intuit Common Stock, as reported on the Nasdaq Global Select Market on April 28, 2020, rounded to the nearest cent) multiplied by (y) the total number of shares of Intuit Common Stock to be registered.

(3)	Computed in accordance with Rule 457(f) under the Securities Act to be $448,462, which is equal to .0001298 multiplied by the proposed maximum aggregate offering price of $3,455,022,125.

(4)	Previously paid.

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the SEC, acting pursuant to said section 8(a), may determine.

 

 

 

 

 

The information in this consent solicitation statement/prospectus is not complete and may be changed. We may not distribute or issue the securities being registered pursuant to this registration statement until the registration statement (of which this preliminary consent solicitation statement/prospectus is a part), as filed with the Securities and Exchange Commission, is effective. This preliminary consent solicitation statement/prospectus is not an offer to sell nor should it be considered a solicitation of an offer to buy the securities described herein in any state where the offer or sale is not permitted.

 

PRELIMINARY CONSENT SOLICITATION STATEMENT/PROSPECTUS—SUBJECT TO COMPLETION

DATED MAY 7, 2020

 

CONSENT SOLICITATION STATEMENT OF CREDIT KARMA, INC.		PROSPECTUS OF INTUIT INC.

To Stockholders of Credit Karma, Inc.:

As you may be aware, Credit Karma, Inc. (“Credit Karma”) entered into an Agreement and Plan of Merger, dated as of February 24, 2020 (the “Merger Agreement”), with Intuit Inc. (“Intuit”) and two of Intuit’s wholly owned subsidiaries, pursuant to which, through a series of mergers, Credit Karma will become a wholly owned subsidiary of Intuit, among other transactions contemplated therein (collectively, the “Transaction”).

The aggregate purchase price to be paid by Intuit will be $7.1 billion, subject to certain holdbacks and adjustments set forth in the Merger Agreement. The merger consideration to be paid to the securityholders of Credit Karma will consist, in the aggregate, of 50% in cash and 50% in shares of Intuit common stock (the “Intuit Common Stock”) at a fixed value of $299.7306 per share (the “Intuit Stock Price”), which represents the average of the daily volume-weighted average sales price per share of Intuit Common Stock on the Nasdaq Global Select Market (the “Nasdaq”), as such daily volume-weighted average sales price per share is reported by Bloomberg L.P., calculated to four decimal places and determined without regard to after-hours trading or any other trading outside the regular trading session trading hours, for each of the ten (10) consecutive trading days ending on and including the trading day immediately preceding the date of the Merger Agreement.

Intuit Common Stock is traded on the Nasdaq under the symbol “INTU.” On May 6, 2020, the last trading day before the date of the accompanying consent solicitation statement/prospectus, the last reported sale price of Intuit Common Stock on the Nasdaq was $275.87.

The Board of Directors of Credit Karma (the “Credit Karma Board”) has considered the Transaction and the terms of the Merger Agreement and has unanimously determined that the Transaction and the Merger Agreement are advisable, fair to and in the best interests of Credit Karma and its stockholders. Accordingly, the Credit Karma Board has unanimously adopted and approved the Transaction and the Merger Agreement. However, the approval of the Merger Agreement and the Transaction requires the affirmative vote or consent of at least (i) a majority of the votes represented by all outstanding shares of Credit Karma common stock (“Credit Karma Common Stock”), voting as a separate class, (ii) a majority of the votes represented by all outstanding shares of Credit Karma preferred stock (“Credit Karma Preferred Stock” and together with Credit Karma Common Stock, “Credit Karma Capital Stock”), voting as a separate class, and (iii) a majority of the votes represented by all outstanding shares of Credit Karma Capital Stock, voting together as a single class on an as-converted basis, is required for the Transaction to close, and you are being sent this document to ask you to adopt and approve the Merger Agreement and the Transaction by executing and returning the written consent (the “Written Consent”) furnished with the accompanying consent solicitation statement/prospectus.

No vote of Intuit stockholders is required to complete the Transaction.

In connection with the execution of the Merger Agreement, certain stockholders of Credit Karma, representing approximately 66% of the outstanding shares of Credit Karma Common Stock and 56% of the outstanding shares of Credit Karma Preferred Stock, in each case as of the date of the Merger Agreement entered into support agreements with Intuit under which they have agreed to, promptly following such stockholder’s receipt of the accompanying consent solicitation statement/prospectus as declared effective by the Securities and Exchange Commission, execute and return consents with respect to their shares of Credit Karma Capital Stock adopting and approving the Merger Agreement and the Transaction (the “Support Agreements”). Therefore, under the Support Agreements, we expect to receive a number of consents sufficient to satisfy the approval requirements described above.

The Credit Karma Board has set February 24, 2020 as the record date for determining Credit Karma stockholders entitled to execute and deliver Written Consents with respect to this solicitation. If you are a record holder of outstanding Credit Karma Capital Stock on that date, you are urged to complete, date and sign the enclosed Written Consent and promptly return it to Credit Karma. See the section entitled “Solicitation of Written Consents” beginning on page 67 of the accompanying consent solicitation statement/prospectus.

We encourage you to read carefully the accompanying consent solicitation statement/prospectus and the documents incorporated by reference into the accompanying consent solicitation statement/prospectus in their entirety, including the section entitled “Risk Factors” beginning on page 24 of the accompanying consent solicitation statement/prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under the accompanying consent solicitation statement/prospectus, or determined if the accompanying consent solicitation statement/prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The accompanying consent solicitation statement/prospectus is dated                    , 2020, and is first being mailed to Credit Karma stockholders on or about                    , 2020.

 

		Kenneth Lin Chief Executive Officer

Credit Karma, Inc.

760 Market Street, 2nd Floor

San Francisco, CA 94102

Notice of Solicitation of Written Consent

To Stockholders of Credit Karma, Inc.:

Pursuant to an Agreement and Plan of Merger, dated as of February 24, 2020 (the “Merger Agreement”), among Intuit Inc. (“Intuit”), Halo Merger Sub I, Inc., a wholly owned subsidiary of Intuit (“Merger Sub I”), Halo Merger Sub II, LLC, a wholly owned subsidiary of Intuit (“Merger Sub II”), Credit Karma, Inc. (“Credit Karma”), and Shareholder Representative Services LLC as the securityholder representative, Merger Sub I will be merged with and into Credit Karma (the “First Merger”), with Credit Karma continuing as the surviving corporation (the “Surviving Corporation”) and a wholly owned subsidiary of Intuit, immediately followed by the merger of the Surviving Corporation with and into Merger Sub II (the “Second Merger” and together with the First Merger, the “Mergers,” and together with the other transactions contemplated in the Merger Agreement, collectively, the “Transaction”), with Merger Sub II continuing as the surviving company (the “Surviving Company”) and a wholly owned subsidiary of Intuit.

The accompanying consent solicitation statement/prospectus is being delivered to you on behalf of the Board of Directors of Credit Karma (the “Credit Karma Board”) to request that holders of Credit Karma capital stock as of the record date of February 24, 2020 execute and return written consents to adopt and approve the Merger Agreement and the Transaction (the “Written Consent”).

The accompanying consent solicitation statement/prospectus describes the Transaction and the actions to be taken in connection with the Transaction and provides additional information about the parties involved. Please give this information your careful attention. A copy of the Merger Agreement is attached as Annex A to the accompanying consent solicitation statement/prospectus.

A summary of the appraisal rights that may be available to you is described in “Appraisal and Dissenters’ Rights” beginning on page 172 of the accompanying consent solicitation statement/prospectus. Please note that if you wish to exercise appraisal rights (i) do not return a Written Consent approving the Transaction, or otherwise return a consent that fails to indicate a decision on the Merger Agreement proposal, (ii) it is not necessary to affirmatively vote against or disapprove the Transaction, and (iii) you must take all other steps necessary to perfect your appraisal rights.

The Credit Karma Board has carefully considered the Transaction and the terms of the Merger Agreement and has unanimously determined that the Transaction and the Merger Agreement are fair to, advisable and in the best interests of Credit Karma and its stockholders.

Please complete, date and sign the Written Consent furnished with the accompanying consent solicitation statement/prospectus and return it promptly to Credit Karma by one of the means described in “Solicitation of Written Consents” beginning on page 67 of the accompanying consent solicitation statement/prospectus.

 

IMPORTANT NOTE ABOUT THIS CONSENT SOLICITATION STATEMENT/PROSPECTUS

This consent solicitation statement/prospectus incorporates important business and financial information about Intuit from other documents that Intuit has filed with the United States Securities and Exchange Commission (the “SEC”) and that are contained in or incorporated by reference herein. For a listing of documents incorporated by reference herein, please see the section entitled “Where You Can Find More Information” beginning on page 177 of this consent solicitation statement/prospectus. Intuit is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and accordingly files its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other information with the SEC. As an electronic filer, Intuit’s public filings are also maintained on the SEC’s Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that website is https://www.sec.gov.

You may obtain any of the documents referred to above from the SEC, through the SEC’s website or from Intuit, without charge, excluding any exhibits to them unless the exhibit is specifically listed as an exhibit to the registration statement of which this consent solicitation statement/prospectus forms a part, by requesting them in writing at the following address or email address:

Intuit Inc.

P.O. Box 7850, Mail Stop 2700

Mountain View, CA 94039-7850

Attention: Investor Relations

investor_relations@intuit.com

Phone: 650-944-6000

To receive timely delivery of the documents, your request must be received no later than                 , 2020. Please note that shelter in place guidance due to the COVID-19 pandemic has resulted in the temporary closure of Intuit’s offices until further guidance is provided. Therefore it is suggested that you request such documents via email.

General information about Intuit, including its annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any amendments and exhibits to those reports, are available free of charge through Intuit’s website at https://investors.intuit.com as soon as reasonably practicable after Intuit files them with, or furnishes them to, the SEC. Information on Intuit’s website is not incorporated into this consent solicitation statement/prospectus and is not a part of this consent solicitation statement/prospectus.

Intuit, Credit Karma, Merger Sub I and Merger Sub II have not authorized anyone to give any information or make any representation about the Transaction, Intuit, Credit Karma, Merger Sub I and Merger Sub II that is different from, or in addition to, the information contained in this consent solicitation statement/prospectus or in any of the materials that have been incorporated by reference into this consent solicitation statement/prospectus. Therefore, if anyone distributes any such information, you should not rely on it. If you are in a jurisdiction where offers to exchange or sell or solicitations of offers to exchange or purchase the securities offered by this consent solicitation statement/prospectus are not permitted, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this consent solicitation statement/prospectus does not extend to you. The information contained in this consent solicitation statement/prospectus speaks only as of the date of this consent solicitation statement/prospectus or, in the case of information in a document incorporated by reference, as of the date of such document, unless the information specifically indicates that another date applies. Intuit and Credit Karma have all contributed to the information relating to the Transaction contained in this consent solicitation statement/prospectus. All information in this consent solicitation statement/prospectus concerning Intuit has been furnished by Intuit. All information in this consent solicitation statement/prospectus concerning Credit Karma has been furnished by Credit Karma.

PROSPECTUS

TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THE TRANSACTION			1
Questions and Answers About the Transaction			1
Questions and Answers for Intuit Stockholders			5
Questions and Answers for Credit Karma Stockholders			6
SUMMARY			10
Parties to the Merger Agreement			10
The Transaction and the Merger Agreement			11
Reasons for Approval by the Intuit Board			11
Reasons for Approval by the Credit Karma Board			11
Regulatory Approvals			11
Conditions to the Completion of the Transaction			12
Consents; Required Consents			13
Record Date; Credit Karma Stockholders Entitled to Consent			13
Submission of Written Consents			13
Executing Written Consents; Revocation of Written Consents			13
Solicitation of Written Consents; Expenses			13
Termination			14
Interests of Directors and Executive Officers			14
Comparison of Rights of Intuit Stockholders and Credit Karma Stockholders			14
Accounting Treatment of the Transaction			15
U.S. Federal Income Tax Consequences			15
Appraisal and Dissenters’ Rights			15
Risk Factors			16
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF INTUIT			17
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CREDIT KARMA			19
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION			20
COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA			21
MARKET PRICE AND DIVIDEND INFORMATION			23
RISK FACTORS			24
Risks Related to the Transaction			24
Risks Relating to Intuit and the Surviving Company after Completion of the Transaction			27
Risks Related to Intuit’s Business			30
Risks Related to Credit Karma’s Business			45
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS			65
SOLICITATION OF WRITTEN CONSENTS			67
Purpose of the Consent Solicitation			67
Record Date			67
Credit Karma Stockholders Entitled to Consent			67
Written Consents; Required Written Consents			67
Submission of Written Consents			68

 

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Executing Written Consents; Revocation of Written Consents			68
Solicitation of Written Consents; Expenses			69
THE TRANSACTION			70
Structure of the Transaction			70
Merger Consideration to Credit Karma Stockholders			70
Background of the Transaction			71
The Intuit Board’s Reasons for the Transaction			77
The Credit Karma Board’s Reasons for the Transaction			81
Regulatory Approvals			84
No Intuit Stockholder Approval Required			85
Written Consent of the Holders of Credit Karma Capital Stock			85
Indemnification			86
Listing of Intuit Common Stock			86
Appraisal and Dissenters’ Rights			86
Tax Treatment of the Mergers			87
Accounting Treatment of the Mergers			87
THE MERGER AGREEMENT			88
Explanatory Note Regarding the Merger Agreement			88
The Transaction			88
Closing; Effective Time			89
Merger Consideration; Effect of the Transaction on Capital Stock			89
Treatment of Credit Karma Equity Awards			90
Merger Consideration Adjustments			91
Escrow Fund			93
Exchange Procedures			93
Fractional Shares			94
Withholding Rights			94
Dissenting Shares			94
Representations and Warranties			95
Conduct of Business of Credit Karma Prior to Completion of the Transaction			98
Credit Karma Written Consent			101
No Solicitation of Acquisition Proposals			101
Change of Credit Karma Board’s Recommendation; Superior Proposal			102
Regulatory Approvals; Efforts to Complete the Transaction			104
Credit Karma Employee Benefits Matters			106
Other Covenants and Agreements			107
Conditions to Completion of the Transaction			108
Indemnification			110
Securityholder Representative			111
Termination of the Merger Agreement			111
Expenses and Termination Fees			112
Amendments and Waivers			114
No Third-Party Beneficiaries			114
Specific Performance			114

 

ii

Governing Law			114
ANCILLARY AGREEMENTS			115
Support Agreement			115
U.S. FEDERAL INCOME TAX CONSEQUENCES			117
INFORMATION ABOUT INTUIT			122
INFORMATION ABOUT MERGER SUB I			123
INFORMATION ABOUT MERGER SUB II			124
INFORMATION ABOUT CREDIT KARMA			125
CREDIT KARMA MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			126
Overview			126
Factors Affecting Its Future Performance			126
Components of Results of Operations			128
Discussion of Results of Operations			129
Liquidity and Capital Resources			133
Off-Balance Sheet Arrangements			135
Commitments			135
Recent Accounting Pronouncements			135
Critical Accounting Policies and Estimates			135
Qualitative and Quantitative Factors about Market Risk			138
INFORMATION ABOUT INTUIT UPON CONSUMMATION OF THE TRANSACTION			139
Directors and Executive Officers of Intuit upon the Consummation of the Transaction			139
CERTAIN RELATED PARTY TRANSACTIONS OF INTUIT			140
Related Party Transactions of Intuit			140
INTERESTS OF AFFILIATES IN THE TRANSACTION			141
Interests of Directors and Executive Officers of Intuit in the Transaction			141
Interests of Directors and Executive Officers of Credit Karma in the Transaction			141
UNAUDITED PRO-FORMA CONDENSED COMBINED FINANCIAL INFORMATION			143
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION			147
COMPARISON OF RIGHTS OF INTUIT STOCKHOLDERS AND CREDIT KARMA STOCKHOLDERS			155
INTUIT EXECUTIVE COMPENSATION			167
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT/DIRECTORS OF INTUIT			168
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT/DIRECTORS OF CREDIT KARMA			170
APPRAISAL AND DISSENTERS’ RIGHTS			172
EXPERTS			175
VALIDITY OF COMMON STOCK			176
WHERE YOU CAN FIND MORE INFORMATION			177
INDEX TO CREDIT KARMA FINANCIAL STATEMENTS			F-1

 

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PART II: INFORMATION NOT REQUIRED IN THE PROSPECTUS			II-1
Item 20. Indemnification of Directors and Officers			II-1
Item 21. Exhibits and Financial Statements			II-2
Item 22. Undertakings			II-2
EXHIBIT INDEX			II-6

 

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RISK FACTORS

In reviewing the Transaction described in this consent solicitation statement/prospectus, you should consider carefully the following risk factors, together with general investment risks and all of the other information included in, or incorporated by reference into, this consent solicitation statement/prospectus. This consent solicitation statement/prospectus also contains forward-looking statements that involve risks and uncertainties. Please read the section entitled “Special Note Regarding Forward-Looking Statements” beginning on page 65 of this consent solicitation statement/prospectus.

The risks described below are the material risks, although not the only risks, relating to the Transaction and each of the Surviving Company, Intuit and Credit Karma in relation to the Transaction. The risks described below are not the only risks that Intuit or Credit Karma currently faces or will face after the consummation of the Transaction. Additional risks and uncertainties not currently known or that are currently expected to be immaterial may also materially and adversely affect Intuit’s business, financial condition or results of operations or the market price of Intuit Common Stock following the consummation of the Transaction.

If any of the following risks and uncertainties relating to the Transaction or Intuit develop into actual events, these events could have a material adverse effect on Intuit’s business, financial condition or results of operations after the Transaction. In addition, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.

Risks Related to the Transaction

There is no assurance when or if the Transaction will be completed.

The completion of the Transaction is subject to the satisfaction or waiver of a number of conditions as set forth in the Merger Agreement, including, among others, the approval of the Merger Agreement and the Transaction by Credit Karma stockholders, the expiration or termination of the applicable waiting periods pursuant to the HSR Act, no applicable law having been enacted that prohibits the consummation of the Transaction and the registration statement of which this consent solicitation statement/prospectus forms a part of having been declared effective by the SEC. There can be no assurance that Intuit and Credit Karma will be able to satisfy the closing conditions or that closing conditions beyond their control will be satisfied or waived. For a discussion of the conditions to the completion of the Transaction, see the section entitled “The Merger Agreement—Conditions to Completion of the Transaction” beginning on page 108 of this consent solicitation statement/prospectus. If the Transaction and the integration of the companies’ respective businesses are not completed within the expected time frame, such delay may materially and adversely affect the synergies and other benefits that Intuit and Credit Karma expect to achieve as a result of the Transaction and could result in additional transaction costs, loss of revenue or other effects associated with uncertainty about the Transaction.

Intuit and Credit Karma can mutually agree at any time to terminate the Merger Agreement, even if Credit Karma stockholders have already adopted the Merger Agreement and thereby approved the Transaction. Intuit and Credit Karma can also terminate the Merger Agreement under other specified circumstances. See the section entitled “The Merger Agreement—Termination of the Merger Agreement” beginning on page 111 of this consent solicitation statement/prospectus.

The share consideration is calculated through a fixed price per share of Intuit Common Stock and such fixed price per share will not be adjusted in the event of any change in Intuit’s stock price. As a result, Credit Karma’s securityholders cannot be certain of the market value of the merger consideration they will receive until the Transaction is completed.

Upon completion of the Transaction, the aggregate merger consideration to be paid to Credit Karma’s securityholders will consist, in the aggregate, of 50% in cash and 50% in shares of Intuit Common Stock. The shares of Intuit Common Stock issued as the aggregate stock consideration will be issued at a fixed value of $299.7306 per share, which represents the average of the daily volume-weighted average sales price per share of Intuit Common Stock on the Nasdaq, as such daily volume-weighted average sales price per share is reported by Bloomberg L.P., calculated to four decimal places and determined without regard to after-hours trading or any other trading outside the regular trading session trading hours, for each of the ten (10) consecutive trading days ending on and including the trading day immediately preceding the date of the Merger Agreement. This price per share of

 

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Intuit Common Stock will not be adjusted for changes in the market price of Intuit Common Stock between the date that the Merger Agreement was signed and completion of the Transaction. Changes in the market price of Intuit Common Stock prior to the completion of the Transaction will affect the value that Credit Karma’s securityholders will receive in the Transaction. Neither Intuit nor Credit Karma is permitted to terminate the Merger Agreement solely as a result of any increase or decrease in the market price of Intuit Common Stock.

Stock price changes may result from a variety of factors, including general market and economic conditions, changes in geopolitical conditions, changes in the values and perceptions of financial services stocks generally or Intuit or the Transaction in particular, changes in Intuit’s business, operations and prospects, the recent outbreak of a novel strain of coronavirus (COVID-19) and actions taken to contain it, and regulatory considerations. Many of these factors are beyond Intuit’s control.

There has been no public market for Credit Karma Capital Stock and the lack of a public market makes it difficult to determine the fair market value of Credit Karma.

The outstanding shares of Credit Karma Capital Stock are privately held and are not traded on any public market. The lack of a public market may make it more difficult to determine the fair market value of Credit Karma than if the outstanding shares of Credit Karma Capital Stock were traded publicly. The value ascribed to Credit Karma’s securities in other contexts, including in private valuations or financings, may not be indicative of the price at which the outstanding shares of Credit Karma Capital Stock may have traded if they were traded on a public market. The merger consideration to be paid to Credit Karma stockholders in the Transaction was determined based on negotiations between the parties and likewise may not be indicative of the price at which the outstanding shares of Credit Karma Capital Stock may have traded if they were traded on a public market.

Credit Karma’s directors and executive officers have interests in the Transaction that may be different from, or in addition to, the interests of Credit Karma stockholders generally.    

In considering the recommendation of the Credit Karma Board that Credit Karma stockholders deliver Written Consents adopting and approving the Merger Agreement proposal, Credit Karma stockholders should be aware and take into account the fact that certain Credit Karma directors and executive officers have interests in the Transaction that may be different from, or in addition to, the interests of Credit Karma stockholders generally and that may create, or be perceived to create, potential conflicts of interest.

These interests include, among other things, arrangements that provide for severance benefits in the event certain executives’ employment is terminated under certain circumstances following completion of the Transaction, retention and transaction bonuses, the vesting of equity-based awards and payments in return for cancellation of Credit Karma equity-based awards, the conversion of unvested Credit Karma RSUs into Assumed RSUs and rights to indemnification and directors’ and officers’ liability insurance that will survive the completion of the Transaction. Certain executive officers of Credit Karma will also serve as executive officers of the Surviving Company following the Transaction. See “Interests of Affiliates in the Transaction—Interests of Directors and Executive Officers of Credit Karma in the Transaction” beginning on page 141 of this consent solicitation statement/prospectus for a more detailed description of these interests. The Credit Karma Board was aware of and carefully considered these interests, among other matters, in evaluating the terms and structure, and in overseeing the negotiation of, the Transaction, in approving the Merger Agreement and in recommending that Credit Karma stockholders deliver Written Consents adopting the Merger Agreement and approving the Transaction.

If the Mergers, taken together, do not qualify as a “reorganization” under Section 368(a) of the Code, U.S. Holders of Credit Karma Capital Stock may be required to pay additional U.S. federal income taxes.

The Mergers, taken together, are intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. It is a condition to the completion of the Mergers that each of Intuit and Credit Karma receive an opinion from their respective counsel to the effect that the Mergers, taken together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Each such opinion will be based on, among other things, certain facts, representations, covenants and assumptions, all of which must be consistent with the state of facts existing at the time of the Mergers. If any of these facts, representations, covenants and assumptions are, or become, inaccurate or incomplete, each such opinion may be invalid, and the conclusions reached therein could be jeopardized. An opinion of counsel represents counsel’s best legal judgment and is not binding on the IRS or the courts, which may not agree with the conclusions set forth in such opinion.

 

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No ruling has been, or will be, sought by Credit Karma or Intuit from the IRS with respect to the Mergers and there can be no assurance that the IRS will not challenge the qualification of the Mergers, taken together, as a “reorganization” under Section 368(a) of the Code or that a court would not sustain such a challenge. If the IRS successfully challenges the reorganization status of the Mergers, U.S. Holders will be treated as if they sold their Credit Karma Common Stock in a fully taxable transaction.

For additional information, please read the section entitled “U.S. Federal Income Tax Consequences” beginning on page 117 of this consent solicitation statement/prospectus. The tax consequences to you of the Mergers will depend on your particular facts and circumstances. Please consult your own tax advisor as to the tax consequences of the Mergers in your particular circumstances, including the applicability and effect of U.S. federal, state, local and non-U.S. income and other tax laws.

Each party is subject to business uncertainties and contractual restrictions while the Transaction is pending, which could adversely affect each party’s business and operations.

In connection with the pendency of the Transaction, it is possible that some customers, partners, vendors, and/or other persons with whom Intuit or Credit Karma has a business relationship may delay or defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationships with Intuit or Credit Karma, as the case may be, as a result of the Transaction, which could negatively affect Intuit’s or Credit Karma’s respective revenues, earnings and cash flows, as well as the market price of Intuit Common Stock, regardless of whether the Transaction is completed.

Under the terms of the Merger Agreement, Credit Karma is also subject to certain restrictions on the conduct of its business prior to completing the Transaction, which may adversely affect its ability to execute certain of its business strategies, including the ability in certain cases to enter into, terminate or amend material contracts, acquire or dispose of assets, incur indebtedness or incur capital expenditures. Such limitations could adversely affect Credit Karma’s business and operations prior to the completion of the Transaction.

Each of the risks described above may be exacerbated by delays or other adverse developments with respect to the completion of the Transaction.

Intuit may be targeted by securities class action and derivative lawsuits that could result in substantial costs and may delay or prevent the Transaction from being completed.

Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on Intuit’s liquidity and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Transaction, then that injunction may delay or prevent the Transaction from being completed, or from being completed within the expected timeframe, which may adversely affect Intuit’s and Credit Karma’s respective businesses, financial positions and results of operation. Currently, neither Intuit nor Credit Karma is aware of any securities class action lawsuits or derivative lawsuits having been filed in connection with the Transaction.

The Transaction may not be accretive, and may be dilutive, to Intuit’s operating earnings per share in the first full fiscal year after close or beyond, which may negatively affect the market price of shares of Intuit Common Stock.

The impact of COVID-19, adverse changes in market conditions, additional transaction and integration-related costs and other factors that may be exacerbated by the impact of COVID-19, such as the failure to realize some or all of the anticipated benefits of the Transaction, may cause the Transaction to be dilutive to Intuit’s operating earnings per share in the first fiscal year after close or beyond. Any dilution of Intuit’s non-GAAP diluted earnings per share could cause the price of shares of Intuit Common Stock to decline or grow at a reduced rate.

 

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The Transaction may be completed even though material adverse changes may result from the announcement of the Transaction, industry-wide changes or other causes.

In general, either party can refuse to complete the Transaction if there is a material adverse effect affecting the other party prior to the closing. However, some types of changes do not permit either party to refuse to complete the Transaction, even if such changes would have a material adverse effect on Intuit or Credit Karma. If adverse changes occur but Intuit and Credit Karma still complete the Transaction, the market price of Intuit Common Stock may suffer. For a more complete discussion of what constitutes a material adverse effect on Intuit or Credit Karma under the Merger Agreement, see the section entitled “The Merger Agreement—Representations and Warranties” beginning on page 95 of this consent solicitation statement/prospectus.

Risks Relating to Intuit and the Surviving Company after Completion of the Transaction

The Surviving Company may not be able to integrate successfully into Intuit and many of the anticipated benefits of acquiring Credit Karma may not be realized.

Intuit and Credit Karma entered into the Merger Agreement with the expectation that the Transaction will result in various benefits, including, among other things, operating efficiencies, synergies and cost savings. Achieving the anticipated benefits of the Transaction is subject to a number of uncertainties, including whether the businesses of Intuit and Credit Karma can be integrated in an efficient and effective manner.

It is possible that the integration process could take longer than anticipated and could result in the loss of valuable employees, the disruption of each company’s ongoing businesses, processes and systems or inconsistencies in standards, controls, procedures, practices, policies and compensation arrangements, any of which could adversely affect Intuit and the Surviving Company’s ability to achieve the anticipated benefits of the Transaction. Intuit and the Surviving Company’s results of operations could also be adversely affected by any issues attributable to either company’s operations that arise or are based on events or actions that occur before the closing. Intuit and the Surviving Company may have difficulty addressing possible differences in corporate cultures and management philosophies. The integration process is subject to a number of uncertainties, and no assurance can be given that the anticipated benefits will be realized or, if realized, the timing of their realization. Failure to achieve these anticipated benefits could result in increased costs or decreases in the amount of expected net income and could adversely affect Intuit and the Surviving Company’s future business, financial condition, operating results and prospects.

Uncertainties associated with the Transaction may cause a loss of management personnel and other key employees, and Intuit and Credit Karma may have difficulty attracting and motivating management personnel and other key employees, which could adversely affect the future business and operations of the Surviving Company.

Intuit and Credit Karma are dependent on the experience and industry knowledge of their respective management personnel and other key employees to execute their business plans. The Surviving Company’s success after the completion of the Transaction will depend in part upon the ability of Intuit and Credit Karma to attract, motivate and retain key management personnel and other key employees. Prior to completion of the Transaction, current and prospective employees of Intuit and Credit Karma may experience uncertainty about their roles within the Surviving Company following the completion of the Transaction, which may have an adverse effect on the ability of each of Intuit and Credit Karma to attract, motivate or retain management personnel and other key employees. In addition, no assurance can be given that Intuit and the Surviving Company will be able to attract, motivate or retain management personnel and other key employees of Intuit and Credit Karma to the same extent that Intuit and Credit Karma have previously been able to attract or retain their own employees. If key employees terminate their employment, Intuit and the Surviving Company’s business activities may be adversely affected and management’s attention may be diverted from successfully integrating Intuit and Credit Karma to hiring suitable replacements, all of which may cause Intuit and the Surviving Company’s business to suffer.

 

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Completion of the Transaction may trigger change in control, assignment or other provisions in certain agreements to which Credit Karma or its subsidiaries are a party, which may have an adverse impact on the Surviving Company’s business and results of operations.

The completion of the Transaction may trigger change in control, assignment and other provisions in certain agreements to which Credit Karma or its subsidiaries are a party. If Intuit and Credit Karma are unable to negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages. Even if Intuit and Credit Karma are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to Credit Karma or the Surviving Company. Any of the foregoing or similar developments may have an adverse impact on the Surviving Company’s business and results of operations.

The unaudited pro forma condensed combined financial information in this consent solicitation statement/prospectus is presented for illustrative purposes only and may not be reflective of the operating results and financial condition of the Surviving Company following completion of the Transaction.

The unaudited pro forma condensed combined financial information in this consent solicitation statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what the Surviving Company’s actual financial position or results of operations would have been had the Transaction been completed on the dates indicated. Further, the Surviving Company’s actual results and financial position after the Transaction may differ materially and adversely from the unaudited pro forma condensed combined financial data that is included in this consent solicitation statement/prospectus. The unaudited pro forma condensed combined financial information has been prepared with the expectation, as of the date of this consent solicitation statement/prospectus, that Intuit will be identified as the acquirer under GAAP and reflects adjustments based upon preliminary estimates of the fair value of tangible and intangible assets to be acquired and liabilities to be assumed using information currently available. The final acquisition accounting will be based upon the actual purchase price and the fair value of the tangible and intangible assets and liabilities of the party that is determined to be the acquiree under GAAP as of the date of the completion of the Transaction. In addition, subsequent to the closing date, there may be further refinements of the acquisition accounting as additional information becomes available. Accordingly, the final acquisition accounting may differ materially from the pro forma condensed combined financial information reflected in this document. For more information, see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 143 of this consent solicitation statement/prospectus.

The shares of Intuit Common Stock to be received by Credit Karma stockholders upon completion of the Transaction will have different rights from shares of Credit Karma Capital Stock.

Upon completion of the Transaction, Credit Karma stockholders will no longer be stockholders of Credit Karma, but will instead receive cash and also become stockholders of Intuit and their rights as Intuit stockholders will be governed by the terms of the Intuit restated certificate of incorporation (the “Intuit Restated Certificate”) and the Intuit amended and restated bylaws (the “Intuit Bylaws”). The terms of the Intuit Restated Certificate and the Intuit Bylaws are in some respects materially different than the terms of Credit Karma’s eighth amended and restated certificate of incorporation, as amended, (the “Credit Karma Restated Certificate”), and Credit Karma’s second amended and restated bylaws (the “Credit Karma Bylaws”), which currently govern the rights of Credit Karma stockholders. For a discussion of the different rights associated with shares of Credit Karma Capital Stock and shares of Intuit Common Stock, see the section entitled “Comparison of Rights of Intuit Stockholders and Credit Karma Stockholders” beginning on page 155 of this consent solicitation statement/prospectus.

Intuit and Credit Karma will incur significant transaction and integration-related costs in connection with the Transaction, and any such costs could adversely affect Intuit’s ability to execute on its integration plan.

Intuit expects to incur a number of non-recurring costs associated with the Transaction and combining the operations of the two companies. Additionally, each of Intuit and Credit Karma will incur significant transaction costs related to the Transaction, some of which must be paid even if the Transaction is not completed. These costs are substantial and include financial advisory, legal and accounting costs. Intuit also will incur significant integration-related fees and costs related to formulating and implementing integration plans, including facilities and systems consolidation

 

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costs and employment-related costs. Intuit continues to assess the magnitude of these costs, and additional unanticipated costs may be incurred in the Transaction and the integration of the two companies’ businesses. Although Intuit expects that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow Intuit to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all.

The future results of Intuit will suffer if Intuit does not effectively manage its expanded operations following the completion of the Transaction.

Following the completion of the Transaction, the size of the Intuit business will increase significantly beyond the current size of either Intuit’s or Credit Karma’s business. Intuit’s future success depends, in part, upon its ability to manage this expanded business, which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. There can be no assurances that Intuit will be successful or that it will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the Transaction.

Intuit may take on additional indebtedness to finance the acquisition, which could adversely affect Intuit and the Surviving Company, including by decreasing Intuit and the Surviving Company’s business flexibility.

In connection with the completion of the Transaction, Intuit intends to increase its level of indebtedness. Intuit’s increased level of debt, together with certain covenants that may be imposed on Intuit and the Surviving Company in connection with incurring this indebtedness, will, among other things, (a) require Intuit to dedicate a larger portion of its cash flow from operations to servicing and repayment of debt; (b) reduce funds available for strategic initiatives and opportunities, dividends, share repurchases, working capital and other general corporate needs; (c) limit Intuit’s ability to incur certain kinds or amounts of additional indebtedness, which could restrict Intuit’s flexibility to react to changes in Intuit’s business, industry and economic conditions and increase borrowing costs; and (d) create competitive disadvantages relative to other companies with lower debt levels.

In addition, Intuit’s credit ratings will impact the cost and availability of future borrowings and, accordingly, Intuit’s cost of capital. Intuit’s credit ratings will reflect each rating organization’s opinion of Intuit’s financial strength, operating performance and ability to meet its debt obligations. Downgrades in Intuit’s ratings could adversely affect Intuit’s businesses, cash flows, financial condition, operating results and share and debt prices.

The market price of Intuit Common Stock may decline as a result of the Transaction.

The market price of Intuit Common Stock may decline as a result of the Transaction, and holders of Intuit Common Stock could see a decrease in the value of their investment in Intuit Common Stock, if, among other things, Intuit and the Surviving Company are unable to achieve the expected growth in earnings, or if the anticipated benefits, including synergies, cost savings, innovation and operational efficiencies, from the Transaction are not realized, or if the transaction costs related to the Transaction are greater than expected. The market price may also decline if Intuit does not achieve the perceived benefits of the Transaction as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the Transaction on Intuit’s financial position, results of operations or cash flows is not consistent with the expectations of financial or industry analysts. The issuance of shares of Intuit Common Stock in the Transaction could on its own have the effect of depressing the market price for Intuit Common Stock. In addition, many Credit Karma stockholders may decide not to hold the shares of Intuit Common Stock they receive as a result of the Transaction. Other Credit Karma stockholders, such as funds with limitations on their permitted holdings of stock in individual issuers, may be required to sell the shares of Intuit Common Stock they receive as a result of the Transaction. Any such sales of Intuit Common Stock could have the effect of depressing the market price for Intuit Common Stock. Moreover, general fluctuations in stock markets could have a material adverse effect on the market for, or liquidity of, the Intuit Common Stock, regardless of the actual operating performance of the Surviving Company.

The recent global COVID-19 outbreak could harm business and results of operations for each of Intuit, Credit Karma and the Surviving Company following the completion of the Transaction.

In December 2019, COVID-19 was reported in China, and, in March 2020, the World Health Organization declared it a pandemic. Since first being reported in China, COVID-19 has spread to additional countries including the United States. Given the ongoing and dynamic nature of the

 

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circumstances, it is difficult to predict the impact of the COVID-19 outbreak on the businesses and results of operations of each of Intuit, Credit Karma and the Surviving Company, and there is no guarantee that efforts by Intuit, Credit Karma and the Surviving Company to address the adverse impacts of COVID-19 or actions taken to contain COVID-19 or its impact will be effective. The extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and actions taken to contain COVID-19 or its impact, among others. If Intuit or Credit Karma is unable to recover from a business disruption on a timely basis, the Transaction and the Surviving Company’s business and financial conditions and results of operations following the completion of the Transaction could be adversely affected. The Transaction and efforts to integrate the businesses of Intuit and Credit Karma may also be delayed and adversely affected by the COVID-19 outbreak and become more costly. Each of Intuit, Credit Karma and the Surviving Company may also incur additional costs to remedy damages caused by such disruptions, which could adversely affect its financial condition and results of operations.

Risks Related to Intuit’s Business    

Intuit’s businesses routinely encounter and address risks, many of which could cause its future results to be materially different than Intuit presently anticipates. These risks may be amplified by the COVID-19 pandemic, which has caused significant economic instability and uncertainty. Below, Intuit describes certain important risks, categorized solely for ease of reference as strategic, operational, legal and compliance and financial risks. The manner in which Intuit responds to future developments as well as Intuit’s competitors’ reactions to those developments may affect Intuit’s future operating results.

Strategic Risks

Strategic risks relate to Intuit’s current and future operating model, business plans and growth strategy, including the risks associated with the following: competitive pressures on Intuit product offerings and business models; Intuit’s ability to adapt to technological changes and global trends; Intuit’s reliance on third-party intellectual property and Intuit’s ability to protect its own intellectual property rights; the value of its brand; and mergers, acquisitions and divestiture activity that may have unanticipated costs and expenses.

Intuit faces intense competitive pressures that may harm its operating results.

Intuit faces intense competition in all of its businesses, and Intuit expects competition to remain intense in the future. Intuit’s competitors and potential competitors range from large and established entities to emerging start-ups. Intuit’s competitors may introduce superior products and services, reduce prices, have greater technical, marketing and other resources, have greater name recognition, have larger installed bases of customers, have well-established relationships with Intuit’s current and potential customers, advertise aggressively or beat Intuit to market with new products and services. In addition, Intuit may face competition from existing companies, with large established consumer user-bases and broad-based platforms, who may change or expand the focus of their business strategies and marketing to target Intuit customers, including small businesses and tax customers.

Intuit also faces competition from companies with a variety of business models, including increased competition from providers of free offerings, particularly in Intuit’s tax, accounting, and payments businesses. In order to compete, Intuit has also introduced free offerings in several categories, but Intuit may not be able to attract customers as effectively as competitors with different business models. In addition, other providers of free offerings may provide features that Intuit does not offer and customers who have formerly paid for Intuit’s products and services may elect to use Intuit’s competitors’ free offerings instead. These competitive factors may diminish Intuit’s revenue and profitability, and harm Intuit’s ability to acquire and retain customers.

Intuit’s consumer tax business also faces significant potential competition from the public sector, where Intuit faces the risk of federal and state taxing authorities proposing revenue raising strategies that involve developing and providing government tax software or other government return preparation systems at public expense. These or similar programs may be introduced or expanded in the future, which may change the voluntary compliance tax system in ways that could cause Intuit to lose customers and revenue. The IRS Free File Program is currently the sole means by which the IRS offers tax software to taxpayers and, in December 2019, the agreement governing the program was amended to eliminate the pledge by the IRS

 

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that it will not offer a duplicative or competing service. Under this program, the IRS has worked with private industry to provide more than 56 million free returns since 2003, utilizing donated private sector tax software and e-filing services for low and middle income taxpayers at no cost to the government or individual users. However, its continuation depends on a number of factors, including increasing public awareness of and access to the free program, as well as continued government support. The current agreement is scheduled to expire in October 2021. Recently, Intuit has become the subject of certain legal proceedings and regulatory inquiries relating to the provision and marketing of the product that Intuit offers under the IRS Free File Program. While Intuit believes that the allegations in these proceedings are without merit, the proceedings may decrease the government’s support of such program and increase the likelihood that such program is terminated. If the Free File Program were to be terminated or the IRS were to enter the software development and return preparation space, the federal government could become a publicly funded direct competitor of the U.S. tax services industry and of Intuit. Government funded services that curtail or eliminate the role of taxpayers in preparing their own taxes could potentially have material and adverse revenue implications.

Future revenue growth depends upon Intuit’s ability to adapt to technological change as well as global trends in the way customers access software offerings and successfully introduce new and enhanced products, services and business models.

Intuit operates in industries that are characterized by rapidly changing technology, evolving industry standards and frequent new product introductions. Intuit must continue to innovate and develop new products and features to meet changing customer needs and attract and retain talented software developers. Intuit needs to continue to develop its skills, tools and capabilities to capitalize on existing and emerging technologies, which requires Intuit to devote significant resources.

Intuit’s consumer and professional tax businesses depend significantly on revenue from customers who return each year to use Intuit’s updated tax preparation and filing software and services. As Intuit’s existing products mature, encouraging customers to purchase product upgrades becomes more challenging unless new product releases provide features and functionality that have meaningful incremental value. Intuit also provides additional customer benefits by utilizing customer data available to it through its existing offerings. If Intuit is not able to develop and clearly demonstrate the value of new or upgraded products or services to its customers, or effectively utilize its customers’ data to provide them with value, Intuit’s revenues may be harmed. In addition, as Intuit continues to introduce and expand its new business models, including offerings that are free to end users, Intuit’s customers may not perceive value in the additional benefits and services it offers beyond its free offering and may choose not to pay for those additional benefits or Intuit may be unsuccessful in increasing customer adoption of these offerings or Intuit’s risk profile may change, resulting in loss of revenue.

Intuit has devoted significant resources to develop products and services for users of mobile devices, but the versions of Intuit’s products and services developed for these devices may not be compelling to users. Even if Intuit is able to attract new users through these mobile offerings, the amount of revenue that Intuit derives per user from mobile offerings may be less than the revenue that Intuit has historically derived from users of personal computers. As new devices and new platforms are continually being released, it is difficult to predict the problems Intuit may encounter in developing versions of its products and services for use on mobile devices and Intuit may need to devote significant resources to the creation, support, and maintenance of such offerings. If Intuit is slow to develop products and technologies that are compatible with mobile devices, or if Intuit competitors are able to achieve those results more quickly than Intuit, Intuit will fail to capture a significant share of an increasingly important portion of the market for online services, which could adversely affect its business. Further, legislation or regulatory changes may mandate changes in Intuit products that make them less attractive to users.

In some cases, Intuit may expend a significant amount of resources and management attention on offerings that do not ultimately succeed in their markets. Intuit has encountered difficulty in launching new products and services in the past. If Intuit misjudges customer needs in the future, its new products and services may not succeed and its revenues and earnings may be harmed. Intuit has also invested, and in the future, expects to invest in new business models, geographies, strategies and initiatives. Such endeavors may involve significant risks and uncertainties, including distraction of management from current operations, expenses associated with the initiatives and inadequate return on investments. Because these new initiatives are inherently risky, they may not be successful and may harm Intuit’s financial condition and operating results.

 

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Intuit relies on third-party intellectual property in its products and services.

Many of Intuit’s products and services include intellectual property of third parties, which Intuit licenses under agreements that may need to be renewed or renegotiated from time to time. Intuit may not be able to obtain licenses to these third-party technologies or content on reasonable terms, or at all. If Intuit is unable to obtain the rights necessary to use this intellectual property in its products and services, Intuit may not be able to sell the affected offerings, and customers who are currently using the affected product may be disrupted, which may in turn harm Intuit’s future financial results, damage its brand, and result in customer loss. Also, Intuit and its customers have been and may continue to be subject to infringement claims as a result of the third-party intellectual property incorporated in its offerings. Although Intuit tries to mitigate this risk and Intuit may not be ultimately liable for any potential infringement, pending claims require Intuit to use significant resources, require management attention and could result in loss of customers.

Some of Intuit’s offerings include third-party software that is licensed under so-called “open source” licenses, some of which may include a requirement that, under certain circumstances, Intuit make available, or grant licenses to, any modifications or derivative works it creates based upon the open source software. Although Intuit has established internal review and approval processes to mitigate these risks, Intuit may not be sure that all open source software is submitted for approval prior to use in its products. Many of the risks associated with usage of open source may not be eliminated, and may, if not properly addressed, harm Intuit’s business.

Intuit’s intellectual property rights are valuable, and any inability to protect them could reduce the value of Intuit’s products, services, and brand.

Intuit’s patents, trademarks, trade secrets, copyrights, domain names and other intellectual property rights are important assets for Intuit. Intuit aggressively protects its intellectual property rights by relying on federal, state and common law rights in the U.S. and internationally, as well as a variety of administrative procedures. Intuit also relies on contractual restrictions to protect its proprietary rights in products and services. The efforts that Intuit takes to protect its proprietary rights may not always be sufficient or effective. Protecting Intuit’s intellectual property rights is costly and time consuming and may not be successful in every location. Any significant impairment of Intuit’s intellectual property rights could harm its business, its brand and its ability to compete.

Policing unauthorized use and copying of Intuit products is difficult, expensive, and time consuming. Current U.S. laws that prohibit copying gives Intuit only limited practical protection from software piracy and the laws of many other countries provide very little protection. Intuit frequently encounters unauthorized copies of its software being sold through online marketplaces. Although Intuit continues to evaluate and put in place technology solutions to attempt to lessen the impact of piracy and engage in efforts to educate consumers and public policy leaders on these issues and cooperate with industry groups in their efforts to combat piracy, Intuit expects piracy to be a persistent problem that results in lost revenues and increased expenses.

Intuit’s business depends on its strong reputation and the value of its brands.

Developing and maintaining awareness of Intuit brands is critical to achieving widespread acceptance of its existing and future products and services and is an important element in attracting new customers. Adverse publicity (whether or not justified) relating to events or activities attributed to Intuit, members of its workforce, agents, third parties Intuit relies on, or its users, may tarnish Intuit’s reputation and reduce the value of its brands. Intuit’s brand value also depends on its ability to provide secure and trustworthy products and services as well as Intuit’s ability to protect and use its customers’ data in a manner that meets their expectations. In addition, a security incident which results in unauthorized disclosure of Intuit’s customers’ sensitive data could cause material reputational harm. Damage to Intuit’s reputation and loss of brand equity may reduce demand for its products and services and thus have an adverse effect on Intuit’s future financial results, as well as require additional resources to rebuild Intuit’s reputation and restore the value of the brands and could also reduce Intuit’s stock price.

 

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Intuit’s acquisition and divestiture activities may disrupt its ongoing business, may involve increased expenses and may present risks not contemplated at the time of the transactions.

Intuit has acquired and may continue to acquire companies, products, technologies and talent that complement its strategic direction, both in and outside the United States. Acquisitions, including the Transaction, involve significant risks and uncertainties, including:

 

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inability to successfully integrate the acquired technology, data assets and operations into Intuit’s business and maintain uniform standards, controls, policies, and procedures;

 

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inability to realize synergies expected to result from an acquisition;

 

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disruption of Intuit’s ongoing business and distraction of management;

 

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challenges retaining the key employees, customers, resellers and other business partners of the acquired operation;

 

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the internal control environment of an acquired entity may not be consistent with Intuit’s standards or with regulatory requirements, and may require significant time and resources to align or rectify;

 

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unidentified issues not discovered in Intuit’s due diligence process, including product or service quality issues, intellectual property issues and legal contingencies;

 

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failure to successfully further develop an acquired business or technology and any resulting impairment of amounts currently capitalized as intangible assets;

 

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risks associated with businesses Intuit acquire or invest in, which may differ from or be more significant than the risks Intuit’s other businesses face; and

 

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in the case of foreign acquisitions and investments, the impact of particular economic, tax, currency, political, legal and regulatory risks associated with specific countries.

Intuit has divested and may in the future divest certain assets or businesses that no longer fit with its strategic direction or growth targets. Divestitures involve significant risks and uncertainties, including:

 

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inability to find potential buyers on favorable terms;

 

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failure to effectively transfer liabilities, contracts, facilities and employees to buyers;

 

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requirements that Intuit retain or indemnify buyers against certain liabilities and obligations;

 

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the possibility that Intuit will become subject to third-party claims arising out of such divestiture;

 

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challenges in identifying and separating the intellectual property and data to be divested from the intellectual property and data that Intuit wishes to retain;

 

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inability to reduce fixed costs previously associated with the divested assets or business;

 

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challenges in collecting the proceeds from any divestiture;

 

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disruption of Intuit’s ongoing business and distraction of management;

 

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loss of key employees who leave Intuit as a result of a divestiture; and

 

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if customers or partners of the divested business do not receive the same level of service from the new owners, Intuit’s other businesses may be adversely affected, to the extent that these customers or partners also purchase other products offered by Intuit or otherwise conduct business with its retained business.

In addition, any acquisition or divestiture that Intuit announces may not be completed if closing conditions are not satisfied. Because acquisitions and divestitures are inherently risky, Intuit’s transactions may not be successful and may, in some cases, harm Intuit’s operating results or financial condition. Although Intuit typically funds its acquisitions through cash available from operations, if Intuit were to use debt to fund acquisitions or for other purposes, its interest expense and leverage would increase significantly, and if Intuit were to issue equity securities as consideration in an acquisition, current shareholders’ percentage ownership and earnings per share would be diluted. See the section entitled “Risks Related to the Transaction” beginning on page 24 of this consent solicitation statement/prospectus for a more detailed description of the risks relating to the Transaction.

Operational Risks

Operational risks arise from internal and external events relating to systems, processes and people. Risks that affect the operation of Intuit’s businesses include the following: potential security incidents; privacy and cybersecurity concerns relating to online offerings; fraudulent activities by third parties; relationships with third parties; competition for and retention of key talent; issues with Intuit’s product launches; problems with Intuit’s information technology infrastructure; and risks associated with operating internationally.

 

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Security incidents, improper access to or disclosure of Intuit data or its customers’ data, or other cyberattacks on Intuit’s systems could harm Intuit’s reputation and adversely affect its business.

Intuit hosts, collects, uses and retains large amounts of sensitive and personal customer and workforce data, including credit card information, tax return information, bank account numbers, login credentials and passwords, personal and business financial data and transactions data, social security numbers and payroll information, as well as Intuit confidential, nonpublic business information. Intuit uses commercially available security technologies and security and business controls to limit access to and use of such sensitive data. Although Intuit expends significant resources to create security protections designed to shield this data against potential theft and security breaches, such measures cannot provide absolute security.

Intuit technologies, systems, and networks have been subject to, and are likely to continue to be the target of, cyberattacks, computer viruses, worms, social engineering, malicious software programs, insider threats, and other cybersecurity incidents that could result in the unauthorized release, gathering, monitoring, use, loss or destruction of sensitive and personal data of Intuit customers and members of its workforce, or Intuit’s sensitive business data or cause temporary or sustained unavailability of its software and systems. These types of attacks can be made by individuals, groups of hackers, and sophisticated organizations including state-sponsored organizations or nation-states themselves. Customers who fail to update their systems, continue to run software that Intuit no longer supports or that fail to install security patches on a timely basis create vulnerabilities and make it more difficult for Intuit to detect and prevent these kinds of attacks. Intuit is increasingly incorporating open source software into its products. There may be vulnerabilities in open source software that make it susceptible to cyberattacks. In addition, because the techniques used to obtain unauthorized access to sensitive information change frequently, and are becoming more sophisticated and are often not able to be detected until after a successful attack, Intuit may be unable to anticipate these techniques or implement adequate preventive measures. Although this is an industry-wide problem that affects software and hardware across platforms, it may increasingly affect Intuit’s offerings because cyber-criminals tend to focus their efforts on well-known offerings that are popular among customers and hold sensitive information and Intuit expects them to continue to do so.

Further, the security measures that Intuit implements may not be able to prevent unauthorized access to its products and its customers’ account data. Third parties may fraudulently induce members of Intuit’s workforce, customers, or users by social engineering means, such as email phishing, to disclose sensitive information in order to gain access to Intuit’s systems. It is also possible that unauthorized access to or disclosure of customer data may occur due to inadequate use of security controls by Intuit’s customers or members of its workforce. Accounts created with weak or recycled passwords could allow cyberattackers to gain access to customer data. Unauthorized persons could gain access to customer accounts if customers do not maintain effective access controls of their systems and software. In addition, Intuit is experiencing new and more frequent attempts by third parties to use the COVID-19 pandemic to fraudulently gain access to its systems, such as through increased email phishing of Intuit’s workforce.

Criminals may also use stolen identity information obtained outside of Intuit’s systems to gain unauthorized access to Intuit’s customers’ data. Intuit has experienced such instances in the past and as the accessibility of stolen identity information increases, generally, Intuit may experience further instances of unauthorized access to its systems through the use of stolen identity information of Intuit customers or members of its workforce in the future. Further, Intuit customers may choose to use the same user ID and password across multiple products and services unrelated to Intuit products. Such customers’ login credentials may be stolen from products offered by third-party service providers unrelated to Intuit and the stolen identity information may be used by a malicious third party to access Intuit products, which could result in disclosure of confidential information. In addition, in response to the COVID-19 pandemic, Intuit has temporarily shifted nearly all of its workforce from office locations to work from home environments, which increases Intuit’s exposure to security-related risks due to operational changes, such as the increased use of videoconferencing.

Intuit’s efforts to protect data may also be unsuccessful due to software bugs (whether open source or proprietary code), break-ins, workforce member error or other threats that evolve. Further, because Intuit has created an ecosystem where customers can have one identity across multiple Intuit products, a security incident may give access to increased amounts of customer data. This may result in disclosure of confidential information, loss of customer confidence in Intuit products, possible litigation, material harm to Intuit’s reputation and financial condition, disruption of

 

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Intuit’s or its customers’ business operations and a decline in Intuit’s stock price. From time to time, Intuit detects, or receives notices from customers or public or private agencies that they have detected actual or perceived vulnerabilities in Intuit’s servers, its software or third-party software components that are distributed with its products or fraudulent activity by unauthorized persons utilizing Intuit’s products with stolen customer identity information. The existence of such vulnerabilities or fraudulent activity, even if they do not result in a security breach, may undermine customer confidence as well as the confidence of government agencies that regulate Intuit’s offerings. Such perceived vulnerabilities could also seriously harm Intuit’s business by tarnishing its reputation and brand and/or limiting the adoption of its products and services and could cause Intuit’s stock price to decline.

A cybersecurity incident affecting the third parties Intuit relies on could expose Intuit or its customers to a risk of loss or misuse of confidential information and significantly damage Intuit’s reputation.

Intuit depends on a number of third parties, including vendors, developers and partners who are critical to its business. Intuit or its customers may grant access to customer data to these third parties to help deliver customer benefits, or to host certain of Intuit’s and its customers’ sensitive and personal data. In addition, Intuit shares sensitive, nonpublic business information (including, for example, materials relating to financial, business and legal strategies) with other vendors in the ordinary course of business.

While Intuit conducts background checks of its workforce, conduct reviews of partners, developers and vendors and uses commercially available technologies to limit access to systems and data, it is possible that one or more of these individuals or third parties may misrepresent their intended use of data or may circumvent Intuit’s controls, resulting in accidental or intentional disclosure or misuse of Intuit’s customers’ or employees’ data. Further, while Intuit conducts due diligence on these third parties with respect to their security and business controls, Intuit may not have the ability to effectively monitor or oversee the implementation of these control measures. Individuals or third parties may be able to circumvent these security and business controls and/or exploit vulnerabilities that may exist in these controls, resulting in the disclosure or misuse of sensitive business and personal customer or employee information and data.

A security incident involving third parties whom Intuit relies on may have serious negative consequences for Intuit’s businesses, including disclosure of sensitive customer or employee data, or confidential or competitively sensitive information regarding its business, including intellectual property and other proprietary data; make Intuit’s products more vulnerable to fraudulent activity; cause temporary or sustained unavailability of Intuit’s software and systems; result in possible litigation, fines, penalties and damages; result in loss of customer confidence; cause material harm to Intuit’s reputation and brands; lead to further regulation and oversight by federal or state agencies; cause adverse financial condition; and result in a reduced stock price.

Concerns about the current privacy and cybersecurity environment, generally, could deter current and potential customers from adopting Intuit products and services and damage its reputation.

The continued occurrence of cyberattacks and data breaches on governments, businesses and consumers in general indicates that Intuit operates in an external environment where cyberattacks and data breaches are becoming increasingly common. If the global cybersecurity environment worsens, and there are increased instances of security breaches of third-party offerings where consumers’ data and sensitive information is compromised, consumers may be less willing to use online offerings, particularly offerings like Intuit’s in which customers often share sensitive financial data. In addition, the increased availability of data obtained as a result of breaches of third-party offerings could make Intuit’s own products more vulnerable to fraudulent activity. Even if Intuit’s products are not affected directly by such incidents, any such incident could damage Intuit’s reputation and deter current and potential customers from adopting its products and services or lead customers to cease using online and connected software products to transact financial business altogether.

 

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If Intuit is unable to effectively combat the increasing amount and sophistication of fraudulent activities by third parties using its offerings, Intuit may suffer losses, which may be substantial, and lose the confidence of its customers and government agencies and Intuit’s revenues and earnings may be harmed.

The online tax preparation, payroll administration, online payments and lending industries have been experiencing an increasing amount of fraudulent activities by third parties, and those fraudulent activities are becoming increasingly sophisticated. Although Intuit does not believe that any of this activity is uniquely targeted at its products or business, this type of fraudulent activity may adversely impact Intuit’s tax, payroll, and payments and lending businesses and is heightened while Intuit is responding to the COVID-19 pandemic with measures such as requiring nearly all of its workforce to work from home. In addition to any losses that may result from such fraud, which may be substantial, a loss of confidence by Intuit customers or by governmental agencies in Intuit’s ability to prevent fraudulent activity that is perpetrated through its offerings may seriously harm Intuit’s business and damage its brand. If Intuit cannot adequately combat such fraudulent activity that is perpetrated through its tax and lending offerings, governmental authorities may refuse to allow Intuit to continue to offer such services or these services may otherwise be adversely impacted, which could include federal or state tax authorities refusing to allow Intuit to process its customers’ tax returns electronically, resulting in a significant adverse impact on Intuit’s earnings and revenue. As fraudulent activities become more pervasive and increasingly sophisticated, and fraud detection and prevention measures must become correspondingly more complex to combat them across the various industries in which Intuit operates, Intuit may implement risk control mechanisms that could make it more difficult for legitimate customers to obtain and use its products, which could result in lost revenue and negatively impact Intuit’s earnings.

If Intuit fails to process transactions effectively or fails to adequately protect against disputed or potential fraudulent activities, its business may be harmed.

Intuit’s operations process a significant volume and dollar value of transactions on a daily basis, especially in its payroll and payments businesses. Despite Intuit’s efforts to ensure that effective processing systems and controls are in place to handle transactions appropriately, it is possible that Intuit may make errors or that funds may be misappropriated due to fraud. The likelihood of any such error or misappropriation may increase as Intuit accelerates the speed at which it process transactions. The systems supporting Intuit’s business are comprised of multiple technology platforms that are sometimes difficult to scale. If Intuit is unable to effectively manage its systems and processes, or if there is an error in its products, Intuit may be unable to process customer data in an accurate, reliable and timely manner, which may harm Intuit’s reputation, the willingness of customers to use its products, and its financial results. In Intuit’s payments processing service business, if merchants for whom Intuit process payment transactions are unable to pay refunds due to their customers in connection with disputed or fraudulent merchant transactions, Intuit may be required to pay those amounts and its payments may exceed the amount of the customer reserves Intuit has established to make such payments.

Business interruption or failure of Intuit’s information technology and communication systems may impair the availability of Intuit’s products and services, which may damage its reputation and harm its future financial results.

Intuit’s reputation and ability to attract, retain and serve its customers is dependent upon the reliable performance of its products and its underlying technical infrastructure. As Intuit continues to grow its online services, Intuit become more dependent on the continuing operation and availability of its information technology and communications systems and those of its external service providers, including, for example, third-party Internet-based or cloud computing services. Intuit does not have redundancy for all of its systems, and its disaster recovery planning may not account for all eventualities. Intuit has designed a significant portion of its software and computer systems to utilize data processing and storage capabilities provided by public cloud providers, such as Amazon Web Services. If any public cloud service that Intuit uses is unavailable to Intuit for any reason, its customers may not be able to access certain of its cloud products or features, which could significantly impact Intuit’s operations, business, and financial results.

Failure of Intuit’s systems or those of its third-party service providers, may result in interruptions in Intuit’s service and loss of data or processing capabilities, all of which may cause a loss in customers, refunds of product fees, and material harm to Intuit’s reputation and operating results.

Intuit’s tax businesses must effectively handle extremely heavy customer demand during critical peak periods, which typically occur from January until April of each year. In response to the COVID-19 pandemic, the IRS extended the filing deadline for tax year 2019 until July 15, 2020 and all states with personal income tax have also extended their due dates, predominantly to July, and Intuit expects heavy customer demand to continue during the extended filing period. Intuit faces significant risks in maintaining adequate service levels during these peak periods when it derives a

 

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substantial portion of its overall revenue from the tax businesses. Any interruptions in Intuit’s online tax preparation or electronic filing service at any time during the tax season, particularly during a peak period, could result in significantly decreased revenue, lost customers, unexpected refunds of customer charges, negative publicity and increased operating costs, any of which could significantly harm Intuit’s business, financial condition and results of operations.

Intuit relies on internal systems and external systems maintained by manufacturers, distributors and other service providers to take and fulfill customer orders, handle customer service requests and host certain online activities. Any interruption or failure of Intuit’s internal or external systems may prevent Intuit or its service providers from accepting and fulfilling customer orders or cause company and customer data to be unintentionally disclosed. Intuit’s continuing efforts to upgrade and expand its network security and other information systems as well as its high-availability capabilities may be costly, and problems with the design or implementation of system enhancements may harm Intuit’s business and its results of operations.

Intuit’s business operations, data centers, information technology and communications systems are vulnerable to damage or interruption from natural disasters, human error, malicious attacks, fire, power loss, telecommunications failures, computer viruses, computer denial of service attacks, terrorist attacks, health emergencies, such as the COVID-19 pandemic, and other events beyond its control. For example, Intuit employees are largely concentrated in California and India, each of which have been affected by the COVID-19 pandemic and subject to governmental actions designed to contain the spread of COVID-19, such as limitations on the size of gatherings, closures of work facilities, schools, public buildings and businesses, quarantines, lockdowns and travel restrictions. The closure of Intuit’s facilities in those and other areas in which it operates, and other restrictions inhibiting its employees’ ability to access Intuit facilities, have disrupted, and could continue to disrupt Intuit’s business operations.

Intuit has also modified its business practices in connection with the pandemic (including employee travel, employee work locations and cancellation of physical participation in meetings, events and conferences), and Intuit may take further actions as may be required by government authorities or that it determines are in the best interests of its employees, customers or third-party partners. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, and that such measures will not impair Intuit’s ability to perform critical functions. Intuit cannot predict how long any such measures will be in place and whether it would reimplement or enhance any such measures in one or more locations in order to respond to the effects of the pandemic or the rules, regulations or guidelines of any governmental authority. Moreover, Intuit may experience longer-term disruptions to its operations, such as shifts in the work location preferences of its workforce for personal health and safety reasons. In addition, Intuit’s corporate headquarters and other critical business operations are located near major seismic faults. In the event of a major natural or man-made disaster, Intuit’s insurance coverage may not completely compensate it for its losses and its future financial results may be materially harmed.

Intuit regularly invests resources to update and improve its internal information technology systems and software platforms. Should Intuit’s investments not succeed, or if delays or other issues with new or existing internal technology systems and software platforms disrupt its operations, Intuit’s business could be harmed.

Intuit relies on its network and data center infrastructure and internal technology systems for many of its development, marketing, operational, support, sales, accounting and financial reporting activities. Intuit is continually investing resources to update and improve these systems and environments in order to meet existing needs, as well as the growing and changing requirements of its business and customers. If Intuit experiences prolonged delays or unforeseen difficulties in updating and upgrading its systems and architecture, Intuit may experience outages and may not be able to deliver certain offerings and develop new offerings and enhancements that it needs to remain competitive. Such improvements and upgrades are often complex, costly and time consuming. In addition, such improvements can be challenging to integrate with Intuit’s existing technology systems, or may uncover problems with its existing technology systems. Unsuccessful implementation of hardware or software updates and improvements could result in outages, disruption in Intuit’s business operations, loss of revenue or damage to its reputation.

 

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If Intuit is unable to develop, manage and maintain critical third-party business relationships, its business may be adversely affected.

Intuit’s growth is increasingly dependent on the strength of its business relationships and its ability to continue to develop, manage and maintain new and existing relationships with third-party partners. Intuit relies on various third-party partners, including software and service providers, suppliers, vendors, manufacturers, distributors, accountants, contractors, financial institutions, core processors, licensing partners and development partners, among others, in many areas of its business in order to deliver its offerings and operate its business. Intuit also relies on third parties to support the operation of its business by maintaining its physical facilities, equipment, power systems and infrastructure. In certain instances, these third-party relationships are sole source or limited source relationships and can be difficult to replace or substitute depending on the level of integration of the third party’s products or services into, or with, Intuit’s offerings and/or the general availability of such third party’s products and services. In addition, there may be few or no alternative third-party providers or vendors in the market. Further, there can be no assurance that Intuit will be able to adequately retain third-party contractors engaged to help Intuit operate its business.

Additionally, the business operations of Intuit’s third-party partners have been and could continue to be disrupted by the COVID-19 pandemic and the actions taken in response to it, including the pandemic’s effects on their third-party partners. If Intuit’s third-party partners are unable to help Intuit operate its business as a result of the COVID-19 pandemic, Intuit’s business and financial results may be negatively impacted. The failure of third parties to provide acceptable and high quality products, services and technologies or to update their products, services and technologies may result in a disruption to Intuit’s business operations and its customers, which may reduce Intuit’s revenues and profits, cause it to lose customers and damage its reputation. Alternative arrangements and services may not be available to Intuit on commercially reasonable terms or at all, or Intuit may experience business interruptions upon a transition to an alternative partner.

Although Intuit has strict standards for its suppliers and business partners to comply with the law and company policies regarding workplace and employment practices, data use and security, environmental compliance, intellectual property licensing and other applicable regulatory and compliance requirements, Intuit cannot control their day-to-day practices. If any of them violate laws or implement practices regarded as unethical, Intuit could experience supply chain disruptions, canceled orders, terminations of or damage to key relationships, and damage to its reputation.

In particular, Intuit has relationships with banks, credit unions and other financial institutions that support certain critical services it offers to its customers. If macroeconomic conditions or other factors, including the effects of the COVID-19 pandemic, cause any of these institutions to fail, consolidate, stop providing certain services or institute cost-cutting efforts, Intuit’s business and financial results may suffer and Intuit may be unable to offer those services to its customers.

Intuit increasingly utilizes the distribution platforms of third parties like Apple’s App Store and Google’s Play Store for the distribution of certain of its product offerings. Although Intuit benefits from the strong brand recognition and large user base of these distribution platforms to attract new customers, the platform owners have wide discretion to change the pricing structure, terms of service and other policies with respect to Intuit and other developers. Any adverse changes by these third parties could adversely affect Intuit’s financial results.

Because competition for Intuit’s key employees is intense, Intuit may not be able to attract, retain and develop the highly skilled employees Intuit needs to support its planned growth.

Much of Intuit’s future success depends on the continued service and availability of skilled personnel, including members of its executive team, and those in technical and other key positions. Experienced personnel in the software, mobile technologies, data science, data security, and software as a service industries are in high demand and competition for their talents is intense, especially in California and India, where the majority of Intuit’s employees are located. Also, as Intuit strives to continue to adapt to technological change and introduce new and enhanced products and business models, Intuit must be able to secure, maintain and develop the right quality and quantity of engaged and committed talent. The incentives Intuit has available to attract, retain, and motivate employees provided by its equity awards may become less effective, and if Intuit were to issue significant equity to attract additional employees, the ownership of its existing stockholders would be diluted. Although Intuit strives to be an employer of choice, it may not be able to continue to successfully attract, retain and develop key personnel, which may cause its business to suffer.

 

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If Intuit experiences significant product accuracy or quality problems or delays in product launches, it may harm Intuit’s revenue, earnings and reputation.

All of Intuit’s tax products and many of its non-tax products have rigid development timetables that increase the risk of errors in its products and the risk of launch delays. Intuit’s tax preparation software product development cycle is particularly challenging due to the need to incorporate unpredictable and potentially late tax law and tax form changes each year and because Intuit’s customers expect high levels of accuracy and a timely launch of these products to prepare and file their taxes by the tax filing deadline. Due to the complexity of Intuit’s products and the condensed development cycles under which it operates, Intuit products may contain errors that could unexpectedly interfere with the operation of the software or result in incorrect calculations. The complexity of the tax laws on which Intuit’s products are based may also make it difficult for Intuit to consistently deliver offerings that contain the features, functionality and level of accuracy that its customers expect. When Intuit encounters problems it may be required to modify its code, work with state tax administrators to communicate with affected customers, assist customers with amendments, distribute patches to customers who have already purchased the product and recall or repackage existing product inventory in its distribution channels. If Intuit encounters development challenges or discover errors in its products either late in its development cycle or after release it may cause Intuit to delay its product launch date or suspend product availability until such issues can be fixed. Any major defects, launch delays or product suspensions may lead to loss of customers and revenue, negative publicity, customer and employee dissatisfaction, reduced retailer shelf space and promotions, and increased operating expenses, such as inventory replacement costs, legal fees or other payments, including those resulting from Intuit’s accuracy guarantee in its tax preparation products. For example, an error in Intuit’s tax products could cause a compliance error for taxpayers, including the over or underpayment of their federal or state tax liability. While Intuit’s accuracy guarantee commits Intuit to reimburse penalties and interest paid by customers due solely to calculation errors in its tax preparation products, such errors may result in additional burdens on third parties that Intuit may need to address or that may cause Intuit to suspend the availability of its products until such errors are addressed. This could also affect Intuit’s reputation, the willingness of customers to use its products, and its financial results. Further, as Intuit develops its platform to connect people to experts, such as connecting TurboTax customers with tax experts through its TurboTax Live offering, or connecting QuickBooks customers with bookkeepers through its QuickBooks Live offering, Intuit faces the risk that these experts may provide advice that is erroneous, ineffective or otherwise unsuitable. Any such deficiency in the advice given by these experts may cause harm to Intuit’s customers, a loss of customer confidence in Intuit’s offerings or harm to Intuit’s reputation or financial results.

Intuit’s international operations are subject to increased risks which may harm its business, operating results, and financial condition.

In addition to uncertainty about Intuit’s ability to generate revenues from its foreign operations and expand into international markets, there are risks inherent in doing business internationally, including:

 

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different or more restrictive privacy, data protection, data localization, and other laws that could require Intuit to make changes to its products, services and operations, such as mandating that certain types of data collected in a particular country be stored and/or processed within that country;

 

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difficulties in developing, staffing, and simultaneously managing a large number of varying foreign operations as a result of distance, language, and cultural differences;

 

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stringent local labor laws and regulations;

 

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credit risk and higher levels of payment fraud;

 

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profit repatriation restrictions, and foreign currency exchange restrictions;

 

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geopolitical events, including natural disasters, acts of war and terrorism, and health emergencies, including divergent governmental responses thereto across the jurisdictions in which Intuit operates;

 

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import or export regulations;

 

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compliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and laws and regulations of other jurisdictions prohibiting corrupt payments to government officials and other third parties;

 

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antitrust and competition regulations;

 

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potentially adverse tax developments;

 

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economic uncertainties relating to European sovereign and other debt;

 

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trade barriers and changes in trade regulations;

 

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political or social unrest, economic instability, repression, or human rights issues; and

 

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risks related to other government regulation or required compliance with local laws.

Violations of the rapidly evolving and complex foreign and U.S. laws and regulations that apply to Intuit’s international operations may result in fines, criminal actions or sanctions against Intuit, its officers or its employees, prohibitions on the conduct of its business and damage to its reputation. Although Intuit has implemented policies and procedures designed to promote compliance with these laws, there can be no assurance that its employees, contractors or agents will not violate Intuit’s policies. These risks inherent in Intuit’s international operations and expansion increase Intuit’s costs of doing business internationally and may result in harm to its business, operating results, and financial condition.

Legal and Compliance Risks

Legal and compliance risks arise from change in the government and regulatory environment, including complex and evolving regulations relating privacy and data security; potential litigation; regulatory inquiries and intellectual property infringement claims.

Increased government regulation of Intuit’s businesses, or changes to existing regulations, may harm its operating results.

Intuit is subject to federal, state, local and international laws and regulations that affect Intuit’s activities, including, without limitation, areas of labor, advertising, tax, financial services, data privacy and security, electronic funds transfer, money transmission, lending, digital content, consumer protection, real estate, billing, e-commerce, promotions, quality of services, intellectual property ownership and infringement, import and export requirements, anti-corruption, foreign exchange controls and cash repatriation restrictions, anti-competition, environmental, health and safety, and other regulated activities. There have been significant new regulations and heightened focus by the government on many of these areas, as well as in areas such as insurance and privacy. As Intuit expands its products and services and revises its business models, both domestically and internationally, it may become subject to additional government regulation or increased regulatory scrutiny. For example, in April 2020, one of Intuit’s subsidiaries became a Small Business Administration (“SBA”)-approved lender under the SBA’s recently established Paycheck Protection Program (“PPP”) authorized by the Coronavirus Aid, Relief and Economic Security Act. Further, regulators (both in the U.S. and in other jurisdictions in which Intuit operates) may adopt new laws or regulations, change existing regulations, or their interpretation of existing laws or regulations may differ from Intuit’s. In response to the COVID-19 pandemic, federal, state, local and foreign governmental authorities have imposed, and may continue to impose, protocols and restrictions intended to contain the spread of the virus, including limitations on the size of gatherings, closures of work facilities, schools, public buildings and businesses, quarantines, lockdowns and travel restrictions. Such restrictions have disrupted and may continue to disrupt Intuit’s business operations and limit its ability to perform critical functions.

The tax preparation industry continues to receive heightened attention from federal and state governments. New legislation, regulation, public policy considerations, changes in the cybersecurity environment, litigation by the government or private entities, changes to or new interpretations of existing laws may result in greater oversight of the tax preparation industry, restrict the types of products and services that Intuit can offer or the prices it can charge, or otherwise cause Intuit to change the way its operates its tax businesses or offers its tax products and services. Intuit may not be able to respond quickly to such regulatory, legislative and other developments, and these changes may in turn increase Intuit’s cost of doing business and limit its revenue opportunities. In addition, if Intuit’s practices are not consistent with new interpretations of existing laws, it may become subject to lawsuits, penalties, and other liabilities that did not previously apply. Intuit is also required to comply with a variety of state revenue agency standards in order to successfully operate its tax preparation and electronic filing services. Changes in state-imposed requirements by one or more of the states, including the required use of specific technologies or technology standards, may significantly increase the costs of providing those services to Intuit’s customers and may prevent Intuit from delivering a quality product to its customers in a timely manner.

 

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Complex and evolving U.S. and international laws and regulation regarding privacy and data protection could result in claims, changes to Intuit’s business practices, penalties, increased cost of operations or otherwise harm Intuit’s business.

Regulations related to the provision of online services is evolving as federal, state and foreign governments continue to adopt new or modify existing laws and regulations addressing data privacy and the collection, processing, storage, transfer and use of data. This includes, for example, the EU’s General Data Protection Regulation (GDPR) and the new California Consumer Protection Act (CCPA), which became effective on January 1, 2020. In Intuit’s efforts to meet the GDPR, CCPA and other data privacy regulations, Intuit has made and continues to make certain operational changes to its products and business practices. If Intuit is unable to engineer products that meet these evolving requirements or help its customers meet their obligations under these or other new data regulations, Intuit might experience reduced demand for its offerings. Further, penalties for non-compliance with these laws may be significant.

In addition, there are global privacy treaties and frameworks that have created compliance uncertainty and increased complexity. For example, the European Commission and the Swiss Government approved the EU-U.S. and Swiss-U.S. Privacy Shield frameworks, respectively, that provide a mechanism for companies to legally transfer personal data from the EU and Switzerland to the U.S. However, these frameworks as well as other personal data transfer mechanisms face a number of legal challenges, both by regulators and private parties. A change in these transfer mechanisms could cause Intuit to incur costs or require it to change its business practices in a manner adverse to its business.

Other governmental authorities throughout the U.S. and around the world are considering similar types of legislative and regulatory proposals concerning data protection. Each of these privacy, security and data protection laws and regulations could impose significant limitations, require changes to Intuit’s business, require notification to customers or workers of a security breach, restrict Intuit’s use or storage of personal information, or cause changes in customer purchasing behavior which may make Intuit’s business more costly, less efficient or impossible to conduct, and may require Intuit to modify its current or future products or services, which may make customers less likely to purchase its products and may harm its future financial results. Additionally, any actual or alleged noncompliance with these laws and regulations could result in negative publicity and subject Intuit to investigations, claims or other remedies, including demands that it modify or cease existing business practices, and expose Intuit to significant fines, penalties and other damages. Intuit has incurred, and may continue to incur, significant expenses to comply with existing privacy and security standards and protocols imposed by law, regulation, industry standards or contractual obligations.

Intuit is frequently a party to litigation and regulatory inquiries which could result in an unfavorable outcome and have an adverse effect on Intuit’s business, financial condition, results of operations and cash flows.

Intuit is subject to various legal proceedings (including class action lawsuits), claims and regulatory inquiries that have arisen out of the ordinary conduct of its business and are not yet resolved and additional claims and inquiries may arise in the future. The number and significance of these claims and inquiries may increase as Intuit’s businesses evolve. Any proceedings, claims or inquiries initiated by or against Intuit, whether successful or not, may be time consuming; result in costly litigation, damage awards, consent decrees, injunctive relief or increased costs of business; require Intuit to change its business practices or products; require significant amounts of management time; result in diversion of significant operations resources; or otherwise harm Intuit’s business and future financial results.

Third parties claiming that Intuit infringes their proprietary rights may cause Intuit to incur significant legal expenses and prevent it from selling its products.

Intuit may become increasingly subject to infringement claims, including patent, copyright, trade secret, and trademark infringement claims. Litigation may be necessary to determine the validity and scope of the intellectual property rights of others. Intuit has received a number of allegations of intellectual property infringement claims in the past and expect to receive more claims in the future based on allegations that its offerings infringe upon the intellectual property held by third parties. Some of these claims are the subject of pending litigation against Intuit and against some of its customers. These claims may involve patent holding companies or other adverse intellectual property owners who have no relevant product revenues

 

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of their own, and against whom Intuit’s own intellectual property may provide little or no deterrence. The ultimate outcome of any allegation is uncertain and, regardless of outcome, any such claim, with or without merit, may be time consuming to defend, result in costly litigation, divert Intuit’s management’s time and attention from its business, require Intuit to stop selling, delay shipping or redesign its products, or require Intuit to pay monetary damages for royalty or licensing fees, or to satisfy indemnification obligations that Intuit has with some of its customers. Intuit’s failure to obtain necessary license or other rights, or litigation arising out of intellectual property claims may harm Intuit’s business.

Intuit is subject to risks associated with information disseminated through its services.

The laws relating to the liability of online services companies for information such as online content disseminated through their services are subject to frequent challenges. In spite of settled law in the U.S., claims are made against online services companies by parties who disagree with the content. Where Intuit’s online content is accessed on the internet outside of the U.S., challenges may be brought under foreign laws which do not provide the same protections for online services companies as in the U.S. These challenges in either U.S. or foreign jurisdictions may give rise to legal claims alleging defamation, libel, invasion of privacy, negligence, copyright or trademark infringement, or other theories based on the nature and content of the materials disseminated through the services. Certain of Intuit’s services include content generated by users of its online services. Although this content is not generated by Intuit, claims of defamation or other injury may be made against Intuit for that content. Any costs incurred as a result of this potential liability may harm Intuit’s business.

Financial Risks

Financial risks relate to Intuit’s ability to meet financial obligations and mitigate exposure to financial impacts to its businesses or its offerings. Financial risks arise from the following: seasonality; excessive subscription cancellations and product returns; unanticipated changes in income tax rates; adverse global macro-economic conditions; credit risks; fluctuations in Intuit’s net income; indebtedness; and the fluctuation of Intuit’s stock price.

Intuit’s tax business is highly seasonal and its quarterly results could fluctuate significantly.

Intuit’s tax offerings have significant seasonal patterns. Revenue from income tax preparation products and services is typically heavily concentrated during November through April and, for the 2019 tax season, the seasonality will be affected by the IRS’s extension of the federal tax filing deadline to July 15, 2020 and all states with personal income tax also extending their due dates, predominantly to July. This seasonality has caused significant fluctuations in Intuit’s quarterly financial results. Intuit’s financial results may also fluctuate from quarter to quarter and year to year due to a variety of factors, including factors that may affect the timing of revenue recognition. These include changes to Intuit’s offerings that result in the inclusion or exclusion of ongoing services; changes in product pricing strategies or product sales mix; the timing of the availability of federal and state tax forms from taxing agencies and the ability of those agencies to receive electronic tax return submissions; changes in customer behavior; and the timing of Intuit’s discontinuation of support for older product offerings. Other factors that may affect Intuit’s quarterly or annual financial results include the timing of acquisitions, divestitures, and goodwill and acquired intangible asset impairment charges. Any fluctuations in Intuit’s operating results may adversely affect Intuit’s stock price.

If actual customer refunds for Intuit’s offerings exceed the amount Intuit has reserved, Intuit’s future financial results may be harmed.

Like many software companies, Intuit refunds customers for product returns and subscription cancellations. Intuit establishes reserves against revenue in its financial statements based on estimated customer refunds. Intuit closely monitors this refund activity in an effort to maintain adequate reserves. In the past, customer refunds have not differed significantly from these reserves. However, if Intuit experiences actual customer refunds, including as a result of financial hardship experienced by its customers related to the COVID-19 pandemic, that significantly exceed the amount it has reserved, it may result in lower net revenue.

 

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Unanticipated changes in Intuit’s income tax rates or other indirect tax may affect Intuit’s future financial results.

Intuit’s future effective income tax rates may be favorably or unfavorably affected by unanticipated changes in the valuation of its deferred tax assets and liabilities, by changes in its stock price, or by changes in tax laws or their interpretation. Foreign governments may enact tax laws that could result in further changes to global taxation and materially affect Intuit’s financial position and results of operations. In addition, Intuit is subject to the continuous examination of its income tax returns by the Internal Revenue Service and other tax authorities. Intuit regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. These continuous examinations may result in unforeseen tax-related liabilities, which may harm Intuit’s future financial results.

An increasing number of states and foreign jurisdictions have adopted laws or administrative practices, that impose new taxes on all or a portion of gross revenue or other similar amounts or impose additional obligations to collect transaction taxes such as sales, consumption, value added, or similar taxes. Intuit may not have sufficient lead time to build systems and processes to collect these taxes properly, or at all. Failure to comply with such laws or administrative practices, or a successful assertion by such states or foreign jurisdictions requiring Intuit to collect taxes where it does not, could result in tax liabilities, including for past sales, as well as penalties and interest.

Adverse global economic conditions could harm Intuit’s business and financial condition.

Adverse macroeconomic developments could negatively affect Intuit’s business and financial condition. Adverse global economic events have caused, and could, in the future, cause disruptions and volatility in global financial markets and increased rates of default and bankruptcy, and could impact consumer and small business spending. In particular, because the majority of Intuit’s revenue is derived from sales within the U.S., economic conditions in the U.S. have an even greater impact on Intuit than companies with a more diverse international presence. Challenging economic times could cause potential new customers not to purchase or to delay purchasing Intuit’s products and services, and could cause Intuit’s existing customers to discontinue purchasing or delay upgrades of Intuit’s existing products and services, thereby negatively impacting Intuit’s revenues and future financial results. Decreased consumer spending levels could also reduce credit and debit card transaction processing volumes causing reductions in Intuit’s payments revenue. Poor economic conditions and high unemployment have caused, and could in the future cause, a significant decrease in the number of tax returns filed, which may have a significant effect on the number of tax returns Intuit prepares and files. In addition, weakness in the end-user consumer and small business markets could negatively affect the cash flow of Intuit’s distributors and resellers who could, in turn, delay paying their obligations to Intuit, which could increase Intuit’s credit risk exposure and cause delays in Intuit’s recognition of revenue or future sales to these customers. Any of these events could harm Intuit’s business and its future financial results.

The COVID-19 pandemic and the actions taken in response to it have significantly increased economic and demand uncertainty. It is likely that the COVID-19 pandemic will cause an economic slowdown, and it is possible that it could cause a global recession and Intuit cannot predict the extent to which existing small businesses would be able to survive such a downturn. Moreover, in connection with the COVID-19 pandemic, unemployment has increased significantly. Accordingly, the risks described in the paragraph above, including reduced customer demand for Intuit’s products and services, decreased consumer spending levels and, in the future, decreases in the number of tax returns filed, may be more likely to materialize, any of which could harm Intuit’s business and its future financial results.

Intuit provides capital to small businesses, which exposes Intuit to certain risk, and may cause Intuit material financial or reputational harm.

Intuit provides capital to qualified small businesses, which exposes Intuit to the risk of its borrowers’ inability to repay such loans. Intuit has also entered into credit arrangements with financial institutions to obtain the capital it provides under this offering. Any termination or interruption in the financial institutions’ ability to lend to Intuit could interrupt Intuit’s ability to provide capital to qualified small businesses. Further, Intuit’s credit decisioning, pricing, loss forecasting and scoring models used to evaluate loan applications may contain errors or may not adequately assess creditworthiness of Intuit’s borrowers, or may be otherwise ineffective, resulting in incorrect approvals or denials of loans. It is also possible that loan applicants could provide false or incorrect information. Moreover, the COVID-19 pandemic and the actions taken in response to it have had a significant

 

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impact on small businesses and may increase the likelihood that Intuit’s borrowers are unable to repay their loans. If any of the foregoing events were to occur, Intuit’s reputation, relationships with borrowers and its financial results could be harmed. In addition, one of Intuit’s subsidiaries has been approved as a lender for the PPP to support its small business customers and other eligible applicants during the pandemic. Intuit’s participation in this program exposes Intuit to many of the risks described above and additional risks, such as borrower default, the SBA declining to honor its guarantee with respect to Intuit’s PPP loans and litigation from borrowers or other related to Intuit’s PPP activities.

Amortization of acquired intangible assets and impairment charges may cause significant fluctuation in Intuit’s net income.

Intuit’s acquisitions have resulted in significant expenses, including amortization and impairment of acquired technology and other acquired intangible assets, and impairment of goodwill. Total costs and expenses in these categories were $26 million in fiscal 2019; $21 million in fiscal 2018; and $14 million in fiscal 2017. Although under current accounting rules goodwill is not amortized, Intuit may incur impairment charges related to the goodwill already recorded and to goodwill arising out of future acquisitions. Intuit tests the impairment of goodwill annually in its fourth fiscal quarter or more frequently if indicators of impairment arise. The timing of the formal annual test may result in charges to Intuit’s statement of operations in its fourth fiscal quarter that may not have been reasonably foreseen in prior periods. At January 31, 2020, Intuit had $1.7 billion in goodwill and $41 million in net acquired intangible assets on its condensed consolidated balance sheet, both of which may be subject to impairment charges in the future. New acquisitions, and any impairment of the value of acquired intangible assets, may have a significant negative impact on Intuit’s future financial results.

Intuit has incurred indebtedness and may incur other debt in the future, which may adversely affect its financial condition and future financial results.

As of January 31, 2020, Intuit had an aggregate of $411 million of indebtedness outstanding under its credit facilities. Intuit may incur additional debt in the future.

This debt may adversely affect Intuit’s financial condition and future financial results by, among other things:

 

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increasing Intuit’s vulnerability to downturns in its business, to competitive pressures and to adverse economic and industry conditions;

 

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requiring the dedication of a portion of Intuit’s expected cash from operations to service its indebtedness, thereby reducing the amount of expected cash flow available for other purposes, including capital expenditures and acquisitions; and

 

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limiting Intuit’s flexibility in planning for, or reacting to, changes in its businesses and its industries.

Intuit’s current unsecured and secured revolving credit facilities impose restrictions on Intuit, including restrictions on Intuit’s ability to create liens on its assets and the ability of its subsidiaries to incur indebtedness, and require Intuit to maintain compliance with specified financial ratios. Intuit’s ability to comply with these ratios may be affected by events beyond its control. In addition, Intuit’s short- and long-term debt includes covenants that may adversely affect Intuit’s ability to incur certain liens or engage in certain types of sale and leaseback transactions. If Intuit breaches any of the covenants under its short- and long-term debt or its unsecured revolving credit facility and does not obtain a waiver from the lenders, then, subject to applicable cure periods, any outstanding indebtedness may be declared immediately due and payable. In addition, there can be no assurance that Intuit would be able to successfully renegotiate any such terms, that any refinancing would be possible or that any additional financing could be obtained on terms that are favorable or acceptable to Intuit.

In addition, changes by any rating agency to Intuit’s credit rating may negatively impact the value and liquidity of both its debt and equity securities. If Intuit’s credit ratings are downgraded or other negative action is taken, the interest rate payable by Intuit under its unsecured revolving credit facility or its secured term loan may increase. In addition, any downgrades in Intuit’s credit ratings may affect its ability to obtain additional financing in the future and may affect the terms of any such financing.

 

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Intuit cannot guarantee that its share repurchase program will be fully consummated or that it will enhance long-term stockholder value.

Intuit has a stock repurchase program under which it is authorized to repurchase its common stock. The repurchase program does not have an expiration date and Intuit is not obligated to repurchase a specified number or dollar value of shares. Intuit’s repurchase program may be suspended or terminated at any time. For example, following the execution and delivery of the Merger Agreement, Intuit temporarily suspended share repurchases under its repurchase program. In addition, Intuit will suspend its repurchase program between the mailing date of this consent solicitation statement/prospectus through the last day on which Credit Karma stockholders are entitled to submit Written Consents, in compliance with Regulation M under the federal securities laws. Even if Intuit’s stock repurchase program is fully implemented, it may not enhance long-term stockholder value. Also, the amount, timing, and execution of Intuit’s stock repurchase programs may fluctuate based on Intuit’s priorities for the use of cash for other purposes and because of changes in cash flows, tax laws, and the market price of its common stock.

Intuit’s stock price may be volatile and your investment could lose value.

Intuit’s stock price is subject to changes in recommendations or earnings estimates by financial analysts, changes in investors’ or analysts’ valuation measures for Intuit’s stock, Intuit’s credit ratings and market trends unrelated to Intuit’s performance. Furthermore, speculation in the press or investment community about Intuit’s strategic position, financial condition, results of operations, business or security of its products, can cause changes in Intuit’s stock price. These factors, as well as general economic and political conditions, including the effects of the COVID-19 pandemic, and the timing of announcements in the public market regarding new products, product enhancements or technological advances by Intuit’s competitors or Intuit, and any announcements by Intuit of acquisitions, major transactions, or management changes may adversely affect Intuit’s stock price. Moreover, the COVID-19 pandemic has caused significant volatility in the global financial markets, which has resulted in significant volatility in Intuit’s stock price recently. Further, any changes in the amounts or frequency of share repurchases or dividends may also adversely affect Intuit’s stock price. A significant drop in Intuit’s stock price could expose Intuit to the risk of securities class actions lawsuits, which may result in substantial costs and divert management’s attention and resources, which may adversely affect Intuit’s business.

Risks Related to Credit Karma’s Business

The COVID-19 pandemic, and the resulting economic and industry-wide downturns, are adversely affecting Credit Karma’s business and may continue to adversely affect its business in the future.

The COVID-19 pandemic and actions taken to contain it have caused significant disruption to the U.S. and worldwide economies, have led to extreme volatility and disruptions in the capital and credit markets, have had significant impacts on regular business operations, may impact consumer behavior in unexpected ways and has led to general widespread uncertainty, and have adversely impacted Credit Karma’s business significantly. In particular, these conditions have led credit card companies and lenders to offer fewer credit cards and loans, reduce their marketing activities generally, and, in many cases, decrease or suspend their activity on Credit Karma’s platform, all of which have significantly impacted Credit Karma’s near-term revenues. These conditions may also negatively impact the creditworthiness of Credit Karma’s members, and thus reduce their ability to qualify for credit cards and loans, and otherwise negatively impact member demand for Credit Karma’s services. Disruptions to the economy and volatility in financial markets could also adversely affect certain of Credit Karma’s partners participating on its platform, and other third parties with which Credit Karma does business, and affect their ability to meet their financial obligations to Credit Karma or participate on its platform. Any extended global economic downturn could also affect demand for Credit Karma products and services and impact Credit Karma’s results and financial condition even after the COVID-19 pandemic is contained and precautionary measures are lifted. In addition, Credit Karma’s business could be disrupted by any precautionary measures taken by Credit Karma and its partners, such as implementing alternative work arrangements for employees, limiting employees’ travel activities and restricting employee attendance at industry events, which could negatively impact Credit Karma’s ability to operate its business, expand its initiatives or launch new initiatives, or slow down its marketing and recruiting efforts. Credit Karma has, in response to the current economic environment, instituted certain cost cutting measures, including reductions in officer and employee compensation and perquisites, office consolidations, voluntary separations, reduced marketing activities and decreased data expenditures, among other things. There can be no assurance that these cost cutting measures will be sufficient in the current environment or that further cost cutting measures will not be necessary in the future. These measures, particularly those affecting Credit Karma’s employee base, may lead to increased officer or employee attrition, difficulties in hiring, or otherwise adversely affect Credit Karma’s operations.

The extent to which the COVID-19 pandemic will impact Credit Karma’s operations and those of its partners and members will depend on many factors and on possible future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic and

 

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industry-wide effects of the pandemic and related containment measures, among others. If economic conditions and the markets in which Credit Karma operates do not improve, or worsen from present levels, Credit Karma anticipates that its business, results of operations and financial condition will continue to be adversely affected.

Credit Karma’s revenue growth rate and financial performance in recent periods will not be indicative of its performance in current periods, and may not be indicative of its future performance.

Credit Karma has grown significantly over the last several years, but its business has declined recently due to the impact of the COVID-19 pandemic, its effect on the overall economy and its effect on Credit Karma’s entire industry. You should not rely on Credit Karma’s revenue for any previous quarterly or annual period as any indication of its revenue or revenue growth in current or future periods. Credit Karma’s revenue may also be affected in the future due to other factors, including slowing demand for its products and services, insufficient growth in the number of its members and partners, increasing competition, a decrease in the growth of its overall market, its failure to continue to capitalize on growth opportunities, increasing regulatory costs and the maturation of its business, among others. Credit Karma expects, over time, to continue to make investments in the development and expansion of its business, but these investments may not result in increased revenue or growth. As a result, Credit Karma’s business, financial condition and results of operations could be adversely affected.

Credit Karma expects a number of factors to cause its results of operations to fluctuate on a quarterly and annual basis, which may make it difficult to predict its future performance.

Credit Karma’s results of operations have historically varied from period to period, and Credit Karma expects that its results of operations will continue to vary significantly from quarter to quarter and year to year because of a variety of factors, many of which are outside of its control. As a result, comparing Credit Karma’s results of operations on a period to period basis may not be meaningful. In addition to other risk factors described elsewhere in this “Risk Factors” section, factors that may contribute to the variability of Credit Karma’s quarterly and annual results of operations include:

 

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the impact of worldwide economic conditions, including the impact and extent of the COVID-19 pandemic and actions taken to contain it;

 

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Credit Karma’s ability to attract and retain members in a cost-effective manner;

 

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Credit Karma’s ability to maintain its network of partners and attract new categories of financial services provider partners;

 

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Credit Karma’s ability to accurately forecast revenue and appropriately plan expenses;

 

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the effects of increased competition on Credit Karma’s business;

 

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Credit Karma’s ability to successfully expand in existing markets and successfully enter new markets;

 

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changes in member behavior with respect to utilizing the Internet or mobile applications to access personal finance information;

 

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changes in the cost of satisfying the servicing needs of Credit Karma’s members;

 

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increases in marketing, sales and other operating expenses that Credit Karma may incur to promote its products and services and increase traffic to its website and mobile platform;

 

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Credit Karma’s business mix between its various credit-related product offerings;

 

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the seasonality of Credit Karma’s business, particularly with respect to its tax product;

 

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changes to deadlines or requirements related to tax filings;

 

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Credit Karma’s ability to maintain an adequate rate of growth and effectively manage that growth;

 

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•

the effects of changes in search engine placement and prominence;

 

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Credit Karma’s ability to keep pace with technology changes in its industry;

 

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the success of Credit Karma’s sales and marketing efforts;

 

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the effects of negative publicity on Credit Karma’s business, reputation or brand;

 

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Credit Karma’s ability to protect, maintain and enforce its intellectual property;

 

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costs associated with defending claims, including intellectual property infringement claims and related judgments or settlements;

 

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changes in laws and regulations relating to financial services, privacy and data protection, changes in accounting rules, or other laws or regulations, or changes in the interpretations or enforcement by government regulators of such laws or regulations;

 

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interruptions in service and any related impact on Credit Karma’s business, reputation or brand;

 

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changes in interest rates;

 

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significant actual or perceived privacy or data security breaches;

 

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the attraction and engagement of qualified employees and key personnel;

 

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Credit Karma’s ability to choose and effectively manage third-party service providers;

 

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the effects of natural or man-made catastrophic events, restrictions on travel or health risks;

 

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the effectiveness of Credit Karma’s internal controls; and

 

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changes in Credit Karma’s tax rates or exposure to additional tax liabilities.

The variability and unpredictability of Credit Karma’s results of operations could result in its failure to meet its expectations with respect to revenue or other results of operations for a particular period.

Credit Karma’s revenue and operating income are substantially dependent upon its credit card product and various loan offerings.

Credit Karma derives a significant portion of revenue and operating income from its credit card product and various loan offerings, and Credit Karma expects this will continue for the foreseeable future. Through these offerings, Credit Karma provides members with free offers for credit cards and loans, and Credit Karma receives fees from its partners when its members accept these offers. This business depends upon Credit Karma’s members’ interest in obtaining new or replacement credit cards or loans, their eligibility for these credit cards or loans, the extent to which Credit Karma’s partners use its services to reach new customers, and competitive alternatives available for both Credit Karma’s members and partners. While Credit Karma intends to continue to broaden the scope of products it offers over time, Credit Karma may not be successful in deriving any significant revenue from these products and offerings. Failure to broaden the scope of offerings that are attractive to Credit Karma’s members and partners may inhibit the growth of repeat business and harm its business, as well as increase the vulnerability of Credit Karma’s core credit card and loan offerings to competitors. Additionally, Credit Karma credit card product and loan offerings are subject to particular risks, including adverse conditions in the economy that affect credit card issuers and their willingness to issue new credit, a reduction in demand due to increased credit losses among credit card issuers, interest rate increases or changes in application approval rates by Credit Karma’s partners. Credit Karma’s partners may also reduce their willingness to make personal loans at more attractive interest rates due to regulatory changes, stricter institutional lending criteria, a lack of adequate funding sources or capital for loan originations or increased borrower default levels, which may occur upon adverse changes in regional, national or global economic conditions. Credit Karma’s credit card and loan offerings business has declined recently due to these and other factors, which have adversely impacted Credit Karma’s overall revenue and operating income in current periods, and these effects may continue in the future.

 

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Credit Karma faces intense competition and if it is unable to compete effectively, its business, financial condition and results of operations will be adversely affected.

The market for Credit Karma’s offerings and similar offerings is highly competitive, evolving, complex and defined by constantly changing technology and member and partner needs, and Credit Karma expects competition to continue to increase in the future. A significant number of companies are developing products and services that currently, or in the future may, compete with some or all of Credit Karma’s solutions. Credit Karma faces competition from numerous U.S. financial technology companies as well as traditional financial institutions that offer online credit and personal finance products and services, credit card issuers, credit bureaus and co-brand partners, such as airlines, hotel groups and retailers, that directly target customers on their own websites and through offline channels. Additionally, there are relatively low barriers to entry into Credit Karma’s markets and as a result, Credit Karma also faces competition from numerous smaller companies in many of its markets and it is likely to face additional competition from new entrants into its markets in the future. As Credit Karma continues to expand its presence internationally, Credit Karma will also face competition from local incumbents in these markets. In addition, Credit Karma faces potential competition from participants in adjacent markets, including large integrated technology companies and advertising marketplaces that may enter its markets by leveraging related technologies and/or partnering with other companies, or providing alternative approaches to provide similar results. Certain of these companies have significantly greater financial resources and longer operating histories than Credit Karma. They may be able to devote greater resources to the development and improvement of their offerings than Credit Karma can and, as a result, may be able to respond more quickly to technological changes and Credit Karma’s members’ and partners’ changing needs.

Credit Karma’s current and future competitors may enjoy competitive advantages, such as:

 

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greater name recognition and longer operating histories;

 

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greater category share in certain markets;

 

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market-specific knowledge;

 

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larger sales and marketing budgets and resources;

 

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access to larger member bases, which often provide incumbency advantages;

 

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broader global distribution and presence;

 

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the ability to bundle competitive offerings with other products and services; and

 

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greater financial, technical and other resources.

Credit Karma’s failure to compete effectively may, among other things, result in fewer members, price reductions, reduced revenue and gross profits and loss of market share. Any failure to meet and address these factors could materially and adversely affect Credit Karma’s business, financial condition and results of operations. Credit Karma’s ability to compete will depend in large part on its ability to provide solutions that better address members’ personal finance needs, help improve end-user application experiences, compete effectively with respect to products and solutions and ensure a high level of member satisfaction. Credit Karma may be required to make substantial additional investments in research and development and sales and marketing in order to respond to these competitive pressures, and Credit Karma may not be able to compete successfully in the future.

Additionally, as the number of products and competitors in Credit Karma’s market increase, claims of infringement, misappropriation and other violations of intellectual property rights may increase. Any claim of infringement, misappropriation or other violation of intellectual property rights by a third party, even those without merit, could cause Credit Karma to incur substantial costs defending against the claim and could distract Credit Karma’s management from its business. Furthermore, Credit Karma does not currently have a patent portfolio and as a result, if a competitor sues Credit Karma for patent infringement, its ability to counterclaim or settle through patent cross-licenses is diminished.

 

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If Credit Karma grows in the future, and fails to manage its growth effectively, its brand, business, financial condition and results of operations could be adversely affected.

Until recently, Credit Karma had experienced rapid growth in its headcount, the number of members on its platform, its geographic reach and its operations. This growth placed a significant strain on Credit Karma’s operational and financial resources and its personnel, and it may be difficult for Credit Karma to maintain the performance and availability of its platform if its product and service offerings become more complex and its market penetration and member base expands. Credit Karma has made, and may make in the future, substantial investments in its technology, customer service and sales and marketing infrastructure. Future growth could challenge Credit Karma’s ability to develop and improve its information technology infrastructure and its operational, financial and management controls, enhance its reporting systems and procedures, recruit, train and retain highly skilled personnel and maintain member and partner satisfaction. Credit Karma could also face inefficiencies or operational failures as a result of its efforts to scale and integrate its infrastructure and processes with Intuit. If Credit Karma does not manage the growth of its business and operations effectively, the quality of its platform and the efficiency of its operations could suffer, which could adversely affect its reputation and brand, business, financial condition and results of operations.

Additionally, Credit Karma’s ability to manage any future growth effectively and to integrate any new employees, technologies and acquisitions into its existing business will require Credit Karma to continue to expand its operational and financial infrastructure and to continue to effectively integrate, develop and motivate a large number of new employees, while maintaining the beneficial aspects of its culture. Credit Karma believes that its company culture, which fosters innovation, creativity and teamwork, has been critical to its success. If Credit Karma is not able to maintain and evolve its culture, its business, financial condition and results of operations could be adversely affected.

Growth of Credit Karma’s business depends on a strong reputation and brand and any failure to maintain, protect and enhance its brand would hurt Credit Karma’s ability to retain or expand its base of members and network of partners, and its business, financial condition and results of operations would be harmed.

Credit Karma believes that building a strong reputation and brand have contributed to its success and its go-to-market strategy. Successfully maintaining, protecting and enhancing Credit Karma’s reputation and brand and increasing its base of members and network of partners will depend on the success of its marketing efforts, Credit Karma’s ability to provide consistent, high-quality services and support and its ability to successfully secure, maintain and defend its rights to use the “Credit Karma” mark, its logo and other trademarks important to its brand, as well as a number of other factors, many of which are outside Credit Karma’s control. Credit Karma believes that its paid marketing initiatives have been critical in promoting awareness of its platform, which in turn drives new membership growth and engagement and expansion of Credit Karma’s partnership network, but future marketing efforts may not be successful or cost-effective.

Credit Karma’s reputation, brand and ability to build trust with existing and new members and partners may be adversely affected by complaints and negative publicity about Credit Karma, its products and services and its platform, its current members or partners or its competitors, even if factually incorrect or based on isolated incidents. Negative perception of Credit Karma’s platform or company may harm its reputation and brand, including as a result of:

 

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complaints or negative publicity about Credit Karma, its platform, members or partners or its policies and guidelines;

 

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fraud;

 

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illegal, negligent, reckless or otherwise inappropriate behavior by members or partners;

 

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actual or perceived disruptions or defects in Credit Karma’s platform, such as privacy or data security breaches or other security incidents, site outages, payment disruptions or other incidents that impact the reliability of Credit Karma’s services;

 

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litigation over, or investigations by regulators into, Credit Karma’s platform;

 

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users’ lack of awareness of, or compliance with, Credit Karma’s policies;

 

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changes to Credit Karma’s policies that members or others perceive as overly restrictive, unclear or inconsistent with its values or mission or that are not clearly articulated;

 

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a failure to comply with legal and regulatory requirements;

 

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a failure to enforce Credit Karma’s policies in a manner that users perceive as effective, fair and transparent;

 

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a failure to operate Credit Karma’s business in a way that is consistent with its values and mission;

 

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inadequate or unsatisfactory member support experiences;

 

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illegal or otherwise inappropriate behavior by Credit Karma’s management team or other employees or contractors;

 

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negative responses by members or partners to new services on Credit Karma’s platform;

 

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a failure to register and prevent misappropriation of Credit Karma’s trademarks; or

 

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any of the foregoing with respect to Credit Karma’s competitors or its industry, to the extent such resulting negative perception affects the public’s perception of Credit Karma or its industry as a whole.

If Credit Karma fails to promote, maintain and enhance the Credit Karma brand, or if Credit Karma incurs excessive expenses in connection with these efforts, Credit Karma’s market share, business, financial conditions and results of operations could be materially and adversely affected.

Credit Karma’s marketing efforts to help grow its business may not be effective.

Successful marketing and member engagement efforts are important to Credit Karma’s ability to grow its business and can be costly. Credit Karma believes that much of the growth in the number of members is attributable to its paid marketing initiatives. Credit Karma’s marketing efforts currently include search engine optimization and search engine marketing, member outreach, television and print advertising campaigns, and placing ads on websites, among other activities, in order to drive potential new members and existing members to Credit Karma’s website and mobile platform. If email providers or internet service providers (ISPs) implement new or more restrictive email or content delivery or accessibility policies, including with respect to net neutrality, it may become more difficult to deliver emails to members or for members to access Credit Karma’s websites and mobile platform. For example, certain email providers may categorize Credit Karma’s emails as “promotional,” and these emails may be directed to an alternate, and less readily accessible, section of a member’s inbox. If email providers materially limit or halt the delivery of Credit Karma’s emails, or if Credit Karma fails to deliver emails to members in a manner compatible with email providers’ email handling or authentication technologies, Credit Karma’s ability to contact members through email could be significantly restricted. Further, Credit Karma may be placed on “spam” lists or lists of entities that have been involved in sending unwanted, unsolicited emails, or ISPs may prioritize or provide superior access to Credit Karma’s competitors’ content, which could adversely affect Credit Karma’s business, financial condition and results of operations.

Additionally, Credit Karma’s marketing initiatives may become increasingly expensive and generating a meaningful return on these initiatives may be difficult. Even if Credit Karma successfully increases revenue as a result of its paid marketing efforts, it may not offset the additional marketing expenses Credit Karma incurs. If Credit Karma is unable to successfully expand its platform to new jurisdictions, attract new members and partners, increase traffic to its website and mobile platform and attract new categories of financial services provider partners, Credit Karma may not succeed in growing its business and its business, financial condition and results of operations could be adversely affected.

 

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If Credit Karma fails to retain its existing members or partners or acquire new members or partners in a cost-effective manner, Credit Karma’s growth rates would likely decline and its business, financial condition and results of operations could be adversely affected.

Credit Karma believes that growth of its business and revenue is dependent on its ability to continue to cost-effectively grow its platform by retaining its existing members and partners and adding new members and partners and categories of financial services provider partners, including in new markets. The increase in the base of members on Credit Karma’s platform attracts more partners and the increase in its network of partners attracts more members. This network takes time to build and may grow more slowly than Credit Karma expects or than it has grown in the past. If Credit Karma fails to retain either its existing members and partners, the value of its network will be diminished.

In addition, to the extent Credit Karma’s partners continue to reduce or suspend their activity on its platform, experience financial difficulties or experience other business disruptions, or if Credit Karma’s relationships with its partners deteriorate for any reason, it may impact Credit Karma’s ability to retain existing members or attract new members. Further, Credit Karma does not have exclusive relationships or long-term contracts with the banks, credit card issuers, mortgage brokers and lenders, whose products are advertised on Credit Karma’s website and mobile platform, and thus, members may obtain services or products from these companies without using Credit Karma’s services. Many of Credit Karma’s partners also offer their products and services directly to members through agents, mass marketing campaigns or other traditional methods of distribution, or through one or more of Credit Karma’s online competitors. An inability to retain partners, or retain them on terms favorable to Credit Karma, and maintain the attractiveness of its services to members and partners could materially and adversely affect Credit Karma’s business, financial condition and results of operations.

Credit Karma’s ability to attract new members and increase revenue from existing members also depends in large part on its ability to enhance and improve its platform and existing products and services and to introduce new features, products and services. To grow Credit Karma’s business and be competitive, Credit Karma must continue to develop products and services that reflect the constantly evolving nature of technology and its members’ needs. The success of these and any other enhancements or developments depend on several factors, including timely introduction and completion, sufficient demand and cost effectiveness. It is difficult to accurately predict member adoption of new features, products or services. Such uncertainty limits Credit Karma’s ability to forecast its future results of operations and subjects Credit Karma to a number of challenges, including Credit Karma’s ability to plan for, and model, future growth. If Credit Karma cannot navigate such uncertainties successfully and it is unable to successfully develop new features, products or services or enhance its existing products and services or otherwise overcome technological challenges and competing technologies to gain market acceptance then Credit Karma’s business, financial condition and results of operations could be adversely affected.

Credit Karma depends on its highly skilled employees to grow and operate its business, and if Credit Karma is unable to hire, retain, manage and motivate its employees, or if its new employees do not perform as Credit Karma anticipates, Credit Karma may not be able to grow effectively and its business, financial condition and results of operations could be adversely affected.

Credit Karma’s future success will depend in part on the continued service of its senior management team, key technical employees and other highly skilled employees, including Kenneth Lin, Credit Karma’s founder and Chief Executive Officer, and on Credit Karma’s ability to continue to identify, hire, develop, motivate and retain talented employees. Credit Karma may not be able to retain the services of any of its employees or other members of senior management in the future. Also, all of Credit Karma’s U.S.-based employees, including its senior management team and Mr. Lin, work for Credit Karma on an at-will basis, and there is no assurance that any such employee will remain with Credit Karma. Credit Karma’s competitors may be successful in recruiting and hiring members of its management team or other key employees, and it may be difficult for Credit Karma to find suitable replacements on a timely basis, on competitive terms or at all. If Credit Karma is unable to attract and retain the necessary employees, particularly in critical areas of its business, Credit Karma may not achieve its strategic goals. Credit Karma’s ability to do so also depends on how well it maintains a strong workplace culture that is attractive to employees, and hiring and training of new employees may be adversely impacted by global

 

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economic uncertainty and office closures, among other things, related to the COVID-19 pandemic. In addition, from time to time, there may be changes in Credit Karma’s senior management team that may be disruptive to its business. If Credit Karma’s senior management team fails to work together effectively and to execute its plans and strategies, Credit Karma’s business, financial condition and results of operations could be adversely affected.

Credit Karma faces intense competition for highly skilled employees, especially in the San Francisco Bay Area where Credit Karma has a substantial presence and need for highly skilled employees. To attract and retain top talent, Credit Karma has had to offer, and Credit Karma believes it will need to continue to offer, competitive compensation and benefits packages. Credit Karma may need to invest significant amounts of cash and equity to attract and retain new employees and expend significant time and resources to identify, recruit, train and integrate such employees, and Credit Karma may never realize returns on these investments. If Credit Karma is unable to effectively manage its hiring needs or successfully integrate new hires, Credit Karma’s efficiency, ability to meet forecasts and employee morale, productivity and engagement could suffer, which could adversely affect Credit Karma’s business, financial condition and results of operations.

Credit Karma is heavily dependent on successful strategic relationships with credit reporting bureaus and its financial services provider partners, and the data and information provided to Credit Karma as a result of such relationships. If Credit Karma is unable to maintain such successful relationships, its reputation, business and results of operations may be harmed.

Credit Karma relies heavily on its successful relationships with credit reporting bureaus and financial services provider partners for data and information pertaining to its members. Credit Karma is dependent upon such data and information for the successful operation of its platform. If data-driven features on Credit Karma’s platform, information that it receives from third parties or analyses that it provides to its members or otherwise performs are inaccurate or contain errors or omissions, or if Credit Karma is unable to maintain the quality and accuracy of its platform in matching members and partners with offers, its reputation and relationships with members and financial services provider partners could be harmed, members and partners could reduce their engagement with Credit Karma’s platform and its business could be adversely affected.

In addition, Credit Karma’s members and partners rely on the security of Credit Karma’s platform in providing and using personal information in connection with use of its products and services. Credit Karma relies on encryption and authentication technology to effect the secure transmission of personal information provided to Credit Karma by its members and third parties, including data from credit reporting bureaus and financial services provider partners regarding Credit Karma’s members. If Credit Karma or its partners are, or are perceived to be, unable to maintain the security of any personal information of Credit Karma’s members or other individuals, or other confidential information maintained by Credit Karma or its partners, its business, financial condition and results of operations could be adversely affected.

Credit Karma’s business is substantially dependent on the financial strength of its partners, including lenders and credit card providers, which subjects Credit Karma to risks related to economic, reputational and market forces affecting its partners and the industries in which they operate.

Credit Karma’s financial service provider partners have been affected by the recent economic and industry-wide downturns. Credit Karma’s success depends in significant part on the financial strength of its lender and credit card provider partners participating on Credit Karma’s platform and continuing relationships with such partners. If Credit Karma’s partners, for any reason, experience financial difficulties, reduce or suspend their participation on Credit Karma’s platform, fail to pay match and/or closing fees when due and/or drop the quality of their services to consumers, Credit Karma’s business will be adversely affected. The occurrence of one or more of these events with a significant number of partners could, alone or in combination, have a material and adverse effect on Credit Karma’s business, financial condition and results of operations.

 

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A small number of key partners account for a substantial portion of Credit Karma’s revenue, and if Credit Karma’s relationships with any of these key partners were to be terminated or the level of business with them significantly reduced over time, Credit Karma’s business and results of operations may be materially and adversely affected.

Historically, certain of Credit Karma’s key partners have accounted for a significant portion of its revenue. For example, Credit Karma’s three largest partners, measured by the revenue derived from them, accounted for a significant portion of Credit Karma’s revenue for each of the fiscal years ended December 31, 2018 and 2019. While Credit Karma has agreements with these key partners, these agreements do not require the partners to spend a minimum amount with Credit Karma and enable them to adjust their respective pricing and approval rates applicable at their discretion or suspend their activity on Credit Karma’s platform with limited or no prior notice to Credit Karma. As a result, Credit Karma generally has no assurances that these key partners will continue to utilize Credit Karma’s platform in line with their projected or historical usage rates, or at all. The recent economic and industry-wide downturns have impacted Credit Karma’s key partners’ businesses, and Credit Karma’s key partners have recently reduced or suspended their activity on Credit Karma’s platform. In addition, some of Credit Karma’s large partners have used, and may in the future use, the size and relative importance of their relationship with Credit Karma to require that Credit Karma enter into agreements with more favorable terms than it would otherwise agree to and obtain price concessions. If these partners were to continue to reduce or suspend their activity on Credit Karma’s platform, or discontinue their relationships with Credit Karma, for any reason, it may have a material adverse effect on Credit Karma business, financial condition and results of operations.

Systems failures and resulting interruptions in the availability of Credit Karma’s website, mobile application or platform could adversely affect Credit Karma’s business, financial condition and results of operations.

It is critical to Credit Karma’s success that members be able to access its platform at all times. Credit Karma’s systems, or those of third parties upon which Credit Karma relies, may experience service interruptions or degradation or other performance problems because of hardware and software defects or malfunctions, distributed denial-of-service and other cyberattacks, infrastructure changes, human error, earthquakes, hurricanes, floods, fires, natural disasters, health epidemics, power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks, computer viruses, ransomware, malware or other events. Credit Karma’s systems also may be subject to break-ins, sabotage, theft and intentional acts of vandalism, including by its own employees. Some of Credit Karma’s systems are not fully redundant and Credit Karma’s disaster recovery planning may not be sufficient for all eventualities. Credit Karma’s business interruption insurance may not be sufficient to cover all of its losses that may result from interruptions in its service as a result of systems failures and similar events.

Credit Karma has experienced and will likely continue to experience system failures and other events or conditions from time to time that interrupt the availability or reduce or affect the speed or functionality of Credit Karma’s platform. These events have resulted in, and similar future events could result in, losses of revenue. In some instances, Credit Karma may not be able to identify the cause or causes of these performance problems within an acceptable period of time. A prolonged interruption in the availability or reduction in the availability, speed or other functionality of Credit Karma’s platform could adversely affect Credit Karma’s business and reputation and could result in the loss of members.

Defects, errors or vulnerabilities in Credit Karma’s applications, backend systems or other technology systems and those of third-party technology providers could harm Credit Karma’s reputation and brand and adversely impact Credit Karma’s business, financial condition and results of operations.

The software underlying Credit Karma’s platform is highly complex and may contain undetected errors or vulnerabilities, some of which may only be discovered after the code has been released. Credit Karma’s practice is to effect continuous releases of software updates. The third-party software that Credit Karma incorporates into its platform may also be subject to errors or vulnerabilities. Any errors or vulnerabilities discovered in Credit Karma’s code or from third-party software after release could result in negative publicity, a loss of users or loss of revenue and access or other performance issues. Such vulnerabilities could also be exploited by malicious actors and result in exposure of data of users on Credit Karma’s platform, or otherwise result in a security breach or other security incident. Credit Karma may need to expend significant financial and development resources to analyze, correct, eliminate or work around errors or defects or to address and eliminate vulnerabilities. Any failure to timely and effectively resolve any such errors, defects or vulnerabilities could adversely affect Credit Karma’s business, reputation, brand, financial condition and results of operations.

 

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Credit Karma expects to continue to make significant investments to maintain and improve the availability of its platform and to enable rapid releases of new features and services. However, it may become increasingly difficult for Credit Karma to maintain and improve the availability of its platform, especially during peak usage times and as Credit Karma’s platform becomes more complex and its user traffic increases. If Credit Karma’s platform is unavailable when users attempt to access it or it does not load as quickly as they expect it to, or experiences capacity constraints due to an overwhelming number of users accessing Credit Karma’s platform simultaneously, users may seek other offerings, and may not return to Credit Karma’s platform as often in the future, or at all. This would adversely affect Credit Karma’s ability to attract members and would decrease the frequency with which they use Credit Karma’s platform. To the extent that Credit Karma does not effectively address capacity constraints, upgrade its systems as needed or continually develop its technology and network architecture to accommodate actual and anticipated changes in technology, Credit Karma’s business, reputation, financial condition and results of operations would be adversely affected.

Credit Karma’s actual or perceived failure to protect information provided by its members and partners, or other confidential information, could adversely affect its business, financial condition and results of operations.

Credit Karma relies on encryption and authentication technology to effect the secure transmission of personal information provided to Credit Karma by its members and third parties, including data from credit reporting bureaus and financial services provider partners regarding its members. Despite the uses of these technologies and its use of other security measures, Credit Karma and its systems, networks and facilities are at risk of cyberattacks and other malicious activity. If Credit Karma or its partners suffer an actual or perceived security breach or otherwise are, or are perceived to be, unable to maintain the security of any personal information of its members or other individuals, or other confidential information maintained by Credit Karma or its partners, Credit Karma’s business, financial condition and results of operations could be harmed and Credit Karma may be exposed to significant liability, adverse publicity and damage to its brand, market and competitive positions and reputation. In addition, Credit Karma is subject to varying levels of regulatory control, including a publicly-available order issued by the FTC, requiring Credit Karma to, among other things, maintain a comprehensive security program designed to address security risks related to the development and management of new and existing products and services for members and undergo a biannual independent security assessment for the next 20 years. Credit Karma’s failure to fulfill the requirements of the FTC’s order could results in fines, penalties, regulatory inquiries, investigations and claims, and negatively impact Credit Karma’s business and reputation.

Despite Credit Karma’s implementation of security measures, its networks, systems and facilities may be susceptible to electronic or physical break-ins, viruses, hacking, and other disruptions and security breaches. These risks are increasing, and are being driven by a variety of sources, including nation-state sponsored espionage and hacking activities, industrial espionage, organized crime, sophisticated organizations and hacking groups and individuals. In addition, Credit Karma depends on third parties to store or process certain information, some of which may be personally identifiable, private or confidential. If these third parties fail to maintain adequate information security measures, or in the event they experience a breach of their networks, systems, or facilities, and member information or other confidential information is compromised, Credit Karma’s business, reputation and results of operations could be significantly harmed. In addition, third parties may attempt to fraudulently induce employees or members to disclose information in order to gain access to member data or other confidential information. Credit Karma or third parties performing services for Credit Karma may face delays in its detection or remediation of, or other responses to, security breaches and other security-related incidents. Any perceived or actual loss or unauthorized use, alteration or disclosure of, or access to, information of members using Credit Karma’s platform, or other confidential information, could significantly harm Credit Karma’s brand and reputation, impair Credit Karma’s ability to attract members and increase engagement by existing members, attract and retain partners, advertisers, subject Credit Karma to regulatory inquiry, investigation and claims, and subject Credit Karma to private claims or litigation alleging damages suffered by members, any of which alone or together could have a material and adverse effect on Credit Karma’s business, financial condition and results of operations.

Further, because techniques used to obtain unauthorized access or sabotage systems are constantly evolving and are generally not identified until they are launched against a target, Credit Karma may be unable to anticipate these techniques or to implement adequate preventative measures. Any or all of these issues could negatively impact Credit Karma’s ability to attract new members and increase engagement by existing members, or subject Credit Karma to third-party lawsuits, claims, liability regulatory claims, investigations or inquiries, and fines or other action or liability, thereby adversely affecting Credit Karma’s business, financial condition and results of operations.

 

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To the extent that fraud, identity theft or concerns about data security cause a general decline in member confidence in online financial transactions, Credit Karma’s revenue could decline and its reputation could be damaged. If members are reluctant to use Credit Karma’s services because of concerns over data privacy, fraud or data security, Credit Karma’s ability to generate revenue would be impaired. Credit Karma’s revenue would also decline if changes in industry standards, regulations or laws deterred people from using online services to conduct transactions, such as applying for credit cards, checking personal credit scores, or from seeking information or services that involve the transmission of confidential information. In addition, if technology upgrades or other expenditures are required to prevent security breaches of Credit Karma’s network, boost general member confidence in sharing information or conducting financial transactions using online services, or prevent fraud and identity theft, Credit Karma may be required to expend significant resources. Credit Karma expects to incur costs in an effort to detect and prevent security breaches, and Credit Karma may face increased costs and requirements to expend substantial resources in the event of an actual or perceived security breach. Further, advances in computer capabilities, new discoveries in the field of cryptography, or other events or developments could result in a compromise or breach of the algorithms Credit Karma uses to protect members’ confidential information, which could have a material and adverse effect on Credit Karma’s business, financial condition and results of operations.

Credit Karma is subject to a number of legal requirements, contractual obligations and industry standards regarding security, data protection and privacy and any failure to comply with these requirements, obligations or standards could have an adverse effect on Credit Karma’s reputation, business, financial condition and results of operations.

Data privacy and information security have become significant issues in the United States, Canada, and in many other countries where Credit Karma has employees and operations. The regulatory framework for privacy and information security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. The U.S. federal and various state and foreign government bodies and agencies have adopted or are considering adopting laws and regulations limiting, or laws and regulations regarding the collection, distribution, use, disclosure, storage and security of various types of information relating to individuals.

Internationally, virtually every jurisdiction in which Credit Karma operates, including Canada, has established its own data security and privacy or data protection legal framework. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of data that identifies or may be used to identify or locate an individual. These laws and regulations often are more restrictive than those in the United States and are rapidly evolving. Complying with these laws, regulations or other obligations relating to privacy, data protection, data localization or information security may cause Credit Karma to incur substantial operational costs or require Credit Karma to modify its data handling practices. Non-compliance could result in proceedings against Credit Karma by governmental entities or others, could result in substantial fines or other liability, and may otherwise adversely affect Credit Karma’s business, financial condition and results of operations.

In addition to government regulation, privacy advocates and industry groups may propose self-regulatory standards from time to time. These and other industry standards may legally or contractually apply to Credit Karma, or Credit Karma may elect to comply with such standards. Because privacy, data protection and data security are critical competitive factors in Credit Karma’s industry, Credit Karma may make statements on its website, on its platform, in marketing materials, or in other settings about Credit Karma’s data security measures. Credit Karma also expects that there will continue to be new proposed laws and regulations concerning privacy, data protection and information security, and Credit Karma cannot yet determine the impact such future laws, regulations and standards may have on its business. New laws, amendments to or re-interpretations of existing laws and regulations, industry standards, contractual obligations and other obligations may require Credit Karma to incur additional costs and restrict its business operations. Because the interpretation and application of laws, standards, contractual obligations and other obligations relating to privacy and data protection are uncertain, it is possible that these laws, standards, contractual obligations and other obligations may be interpreted and applied in a manner that is, or is alleged to be, inconsistent with Credit Karma’s data management practices, Credit Karma’s privacy, data protection or data security policies or procedures, or the features of Credit Karma’s products and services. If so, in addition to the possibility of fines, lawsuits and other claims, Credit Karma could be required to fundamentally change its business activities and practices or modify its offerings, which could have an adverse effect on Credit Karma’s business. Credit Karma may be unable to make such changes and modifications in a commercially reasonable manner or at all, and Credit Karma’s ability to develop new offerings and features could be limited. Any inability to adequately address privacy, data protection or

 

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information security-related concerns, even if unfounded, to successfully negotiate privacy, data protection or information security-related contractual terms with third parties, or to comply with applicable laws, regulations and policies relating to privacy, data protection and information security, could result in additional cost and liability to Credit Karma, damage Credit Karma’s reputation and adversely affect Credit Karma’s business, financial condition and results of operations.

Credit Karma’s failure to protect its intellectual property rights and other proprietary information could diminish the value of Credit Karma’s platform, brand and other intangible assets.

Credit Karma relies, and expects to continue to rely, on a combination of trade secret and domain name protection, trademark and copyright laws, as well as confidentiality and license agreements with Credit Karma employees, consultants and third parties, to protect its intellectual property and proprietary rights. However, third parties may knowingly or unknowingly infringe Credit Karma’s intellectual property and proprietary rights, third parties may challenge Credit Karma’s intellectual property and proprietary rights, pending and future trademark and copyright applications may not be approved and Credit Karma may not be able to prevent infringement without incurring substantial expense. Credit Karma devotes substantial resources to the development of its proprietary technologies and related processes. In order to protect Credit Karma’s proprietary technologies and processes, Credit Karma relies in part on trade secret laws and confidentiality agreements with its employees, consultants and third parties. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover Credit Karma’s trade secrets or develop similar technologies and processes, in which case Credit Karma would not be able to assert trade secret rights. Further, laws in certain jurisdictions may afford little or no trade secret protection, and any changes in, or unexpected interpretations of, the intellectual property laws in any country in which Credit Karma currently operates or may operate in the future, may compromise Credit Karma’s ability to enforce its intellectual property and proprietary rights. Costly and time-consuming litigation could be necessary to enforce and determine the scope of Credit Karma’s proprietary rights. If the protection of Credit Karma’s intellectual property and proprietary rights is inadequate to prevent use or appropriation by third parties, the value of Credit Karma’s platform, brand and other intangible assets may be diminished and competitors may be able to more effectively replicate Credit Karma’s platform and its features. Any of these events could materially and adversely affect Credit Karma’s business, financial condition and results of operations.

Defending against intellectual property infringement claims could be expensive and divert Credit Karma’s management’s attention and resources, which could harm Credit Karma’s business, financial condition and results of operations.

Although Credit Karma believes that its intellectual property and proprietary rights do not infringe on the intellectual property rights of others, Credit Karma faces the risk of claims that Credit Karma has infringed third parties’ intellectual property rights. Any claims of intellectual property infringement, even those without merit, could be time consuming and costly to defend, cause Credit Karma to cease using or incorporating the challenged intellectual property, divert management’s attention and resources or require Credit Karma to enter into royalty or licensing agreements to obtain the right to use a third party’s intellectual property. Any such royalty or licensing agreements may not be available to Credit Karma on acceptable terms, or at all. Additionally, a successful claim of infringement against Credit Karma could result in Credit Karma being required to pay significant damages or enter into costly license or royalty agreements, either of which could adversely affect Credit Karma’s business, financial condition and results of operations.

Credit Karma also uses open source software in its products and services and will continue to use open source software in the future. The terms of many open source licenses to which Credit Karma is subject have not been interpreted by courts, and there is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on Credit Karma’s ability to provide or distribute its products and services. Such unanticipated restrictions may result in contractual liabilities if Credit Karma’s agreements with members and other third parties include representations that Credit Karma have full authority to license, distribute or sell such software. Additionally, Credit Karma may from time to time face claims from third parties claiming ownership of, or demanding release of, the open source software or derivative works that Credit Karma developed using such software, which could include Credit Karma proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require Credit Karma to make its software source code freely available, purchase a costly license or cease offering the implicated products or services unless and until Credit Karma can re-engineer them to avoid infringement.

 

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This re-engineering process could require significant additional research and development resources and time, and Credit Karma may not be able to complete it successfully. In addition to risks related to license requirements, use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of software.

Government regulation of the Internet, mobile devices and e-commerce is evolving, and unfavorable changes could substantially adversely affect Credit Karma’s business, financial condition and results of operations.

Credit Karma is subject to general business regulations and laws as well as federal and state regulations and laws specifically governing the Internet, mobile devices and e-commerce that are constantly evolving. Existing and future laws and regulations, or changes thereto, may impede the growth of the Internet, mobile devices, e-commerce or other online services, and increase the cost of providing online services, require Credit Karma to change its business practices or raise compliance costs or other costs of doing business. These regulations and laws, which continue to evolve, may cover taxation, tariffs, user privacy, data protection, pricing, content, copyrights, distribution, social media marketing, advertising practices, sweepstakes, mobile, electronic contracts and other communications, consumer protection, broadband residential Internet access and the characteristics and quality of services. It is not clear how existing laws governing issues such as property ownership, sales, use and other taxes, libel and personal privacy apply to the Internet and e-commerce. In addition, as Credit Karma continues to expand internationally, it is possible that foreign government entities may seek to censor content available on Credit Karma’s mobile applications or website or may even attempt to block access to Credit Karma’s mobile applications and website. Any failure, or perceived failure, by Credit Karma to comply with any of these laws or regulations could result in damage to Credit Karma’s reputation and brand, a loss in business and proceedings or actions against Credit Karma by governmental entities or others, which could adversely affect Credit Karma’s business, financial condition and results of operations.

Credit Karma faces potential liability, expenses for legal claims and harm to its business based on the nature of its business.

Credit Karma faces potential liability, expenses for legal claims and harm to its business relating to the nature of its business generally, and with the personal finance services Credit Karma facilitates in particular.

Credit Karma is regularly subject to claims, lawsuits, arbitration proceedings, government investigations and other legal, regulatory and other administrative proceedings in the ordinary course of business, including those involving personal injury, property damage, worker classification, labor and employment, anti-discrimination, commercial disputes, competition, consumer complaints, intellectual property disputes, compliance with regulatory requirements and other matters, and Credit Karma may become subject to additional types of claims, lawsuits, government investigations and legal or regulatory proceedings as its business grows and as Credit Karma deploys new services.

In addition, Credit Karma faces potential liability and expense for claims relating to the information that it publish on its website and mobile applications, including claims for trademark and copyright infringement, defamation, libel and negligence, among others.

The results of any such claims, lawsuits, arbitration proceedings, government investigations or other legal or regulatory proceedings cannot be predicted with any degree of certainty. Any claims against Credit Karma, whether meritorious or not, could be time-consuming, result in costly litigation, be harmful to Credit Karma’s reputation, require significant management attention and divert significant resources. Determining reserves for Credit Karma’s pending litigation is a complex and fact-intensive process that requires significant subjective judgment and speculation. It is possible that a resolution of one or more such proceedings could result in substantial damages, settlement costs, fines and penalties that could adversely affect Credit Karma’s business, financial condition and results of operations. These proceedings could also result in harm to Credit Karma’s reputation and brand, sanctions, consent decrees, injunctions or other orders requiring a change in Credit Karma’s business practices. Any of these consequences could adversely affect Credit Karma’s business, financial condition and results of operations. Furthermore, under certain circumstances, Credit Karma has contractual and other legal obligations to indemnify and to incur legal expenses on behalf of its business and commercial partners and current and former directors and officers.

 

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In addition, Credit Karma includes arbitration provisions in its terms of service with members on its platform. These provisions are intended to streamline the litigation process for all parties involved, as arbitration can in some cases be faster and less costly than litigating disputes in state or federal court. However, arbitration may become more costly for Credit Karma or the volume of arbitration may increase and become burdensome, and the use of arbitration provisions may subject Credit Karma to certain risks to its reputation and brand, as these provisions have been the subject of increasing public scrutiny. In order to minimize these risks to Credit Karma’s reputation and brand, Credit Karma may limit its use of arbitration provisions or be required to do so in a legal or regulatory proceeding, either of which could cause an increase in Credit Karma’s litigation costs and exposure.

Further, with the potential for conflicting rules regarding the scope and enforceability of arbitration on a state-by-state basis, as well as between state and federal law, there is a risk that some or all of Credit Karma’s arbitration provisions could be subject to challenge or may need to be revised to exempt certain categories of protection. If Credit Karma’s arbitration agreements were found to be unenforceable, in whole or in part, or specific claims are required to be exempted from arbitration, Credit Karma could experience an increase in its costs to litigate disputes and the time involved in resolving such disputes, and Credit Karma could face increased exposure to potentially costly lawsuits, each of which could adversely affect Credit Karma’s business, financial condition and results of operations.

Credit Karma’s business is subject to a variety of U.S. laws and regulations, many of which are unsettled and still developing, and failure to comply with such laws and regulations could subject Credit Karma to claims or otherwise adversely affect Credit Karma’s business, financial condition or results of operations.

The personal financial technology industry and Credit Karma’s business model are relatively nascent and rapidly evolving. Credit Karma is subject to a variety of laws in the United States and other jurisdictions. Laws, regulations and standards governing issues such as lending, labor and employment, anti-discrimination, online credit card payments, brokerage services, intellectual property, data retention, privacy, data security, consumer protection, website and mobile application accessibility and tax are often complex and subject to varying interpretations, in many cases due to their lack of specificity. The scope and interpretation of these laws, and whether they are applicable to Credit Karma, are often uncertain and may be conflicting, including varying standards and interpretations between state and federal law, between individual states, and even at the city and municipality level. As a result, their application in practice may change or develop over time through judicial decisions or as new guidance or interpretations are provided by regulatory and governing bodies, such as federal, state and local administrative agencies. Credit Karma has been proactively working with state and local governments and regulatory bodies to ensure that its platform is available broadly in the United States, Canada and the United Kingdom.

Further, federal, state and local lending laws and regulations generally require accurate disclosure of the critical components of credit costs so that members can readily compare credit terms from various lenders. These laws and regulations also impose certain restrictions on the advertisement of these credit terms. Because Credit Karma is an aggregator of rate and other information regarding many financial products, including loans and credit cards, it may be subject to some of these laws and regulations and may be held liable under these laws and regulations for information provided through its online services.

Credit Karma believes that it has structured its business and online services to comply with applicable laws and regulations as are currently in effect. Because of uncertainties as to the applicability of some of these laws and regulations to online services and, more specifically, to Credit Karma’s type of business, and considering that Credit Karma’s business has evolved and expanded in a relatively short period of time, and will continue to evolve and develop, Credit Karma may not always have been, and may not always be, in compliance with all applicable federal, state and local laws and regulations. In addition, if applicable laws and regulations are changed or interpreted differently, or if new laws or regulations are enacted, these events could prohibit or substantially alter the content Credit Karma provides on its websites and the operation of its business.

Recent financial, political and other events may increase the level of regulatory scrutiny on larger companies and technology companies in general. Regulatory and administrative bodies may enact new laws or promulgate new regulations that are adverse to Credit Karma’s business, or they may view matters or interpret laws and regulations differently than they have in the past or in a manner adverse to Credit Karma’s business, including by attempting to regulate the commissions businesses like Credit Karma’s agree to with partners. Such regulatory scrutiny or action may create different or conflicting obligations on Credit Karma from one jurisdiction to another.

 

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If Credit Karma is not able to comply with these laws or regulations or if Credit Karma becomes liable under these laws or regulations, including any future laws or obligations which Credit Karma may not be able to anticipate at this time, Credit Karma could be adversely affected, and Credit Karma may be forced to implement new measures to reduce its exposure to this liability. This may require Credit Karma to expend substantial resources or to discontinue certain services or platform features, which would adversely affect Credit Karma’s business. Any failure to comply with applicable laws and regulations could also subject Credit Karma to claims and other legal and regulatory proceedings, fines or other penalties, criminal and civil proceedings, forfeiture of significant assets and other enforcement actions. In addition, Credit Karma could face the revocation of or inability to renew required licenses or registrations, and Credit Karma’s advertisers and other financial services provider partners could terminate their commercial relationships with Credit Karma. Moreover, the increased attention focused upon liability issues as a result of lawsuits and legislative proposals could adversely affect Credit Karma’s reputation or otherwise impact the growth of its business. Any costs incurred to prevent or mitigate this potential liability would also adversely affect Credit Karma’s business, financial condition and results of operations.

Credit Karma may face liability for, and may be subject to claims related to, information on its websites or mobile applications, which, even if unfounded or decided in Credit Karma’s favor, may be extremely costly to defend, could require Credit Karma to pay significant damages and could limit Credit Karma’s ability to operate.

Much of the information published on Credit Karma’s online platform relates to the competitiveness of financial institutions’ rates, products and services. Credit Karma also maintains an online blog and other content designed to educate members about banking and personal finance products. If the information Credit Karma provides is not accurate or is construed as misleading or outdated, members and others could lose confidence in Credit Karma’s products and services and attempt to hold Credit Karma liable for damages and government regulators could impose fines or penalties. Credit Karma may be subjected to claims of violations of law or regulations, and claims for defamation, negligence, discrimination, invasion of personal privacy, fraud, deceptive practices, copyright or trademark infringement, conflicts of interest or other theories relating to the information it publishes. Credit Karma may also be exposed to similar liability in connection with content that members post to its websites through ratings, reviews, forums, blogs, comments or other social media features. In addition, if there are errors or omissions in information Credit Karma published, members, individually or through member class actions, could seek damages for losses incurred if they relied on incorrect information Credit Karma provided. These types of claims have been brought, sometimes successfully, against providers of online services as well as print publications. The scope and amount of Credit Karma’s insurance may not adequately protect Credit Karma against these types of claims. As a result, Credit Karma could be subject to significant damages, which could adversely affect Credit Karma’s business, financial condition and results of operations.

Credit Karma’s presence outside the United States and any future international expansion could subject Credit Karma to additional costs and risks and Credit Karma’s plans may not be successful.

Credit Karma’s capacity for continued growth depends in part on its ability to expand its operations into, and compete effectively in, new markets. Credit Karma launched its platform in Canada in 2016 and in the United Kingdom in 2019, and Credit Karma may continue to expand its international operations. Operating outside of the United States may require significant management attention to oversee operations over a broad geographic area with varying cultural norms and customs, in addition to placing strain on Credit Karma’s finance, analytics, compliance, legal, engineering and operations teams. Credit Karma may incur significant operating expenses and may not be successful in its international expansion for a variety of reasons, including:

 

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recruiting and retaining talented and capable employees outside the United States, and maintaining Credit Karma’s company culture across all of its offices;

 

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providing Credit Karma’s platform and operating its business across a significant distance, in different languages and among different cultures, including the potential need to modify its platform and features to ensure that they are culturally appropriate and relevant in different countries;

 

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competition from local incumbents that better understand the local market, may market and operate more effectively and may enjoy greater local affinity or awareness;

 

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differing demand dynamics, which may make Credit Karma’s platform less successful;

 

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compliance with applicable international laws and regulations, including laws and regulations with respect to privacy, intellectual property, data protection, consumer protection, and unsolicited email, and the risk of penalties to its users and individual members of management or employees if Credit Karma’s practices are deemed to be out of compliance;

 

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obtaining any required government approvals, licenses or other authorizations;

 

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varying levels of Internet and mobile technology adoption and infrastructure;

 

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management of an employee base in jurisdictions that may not give Credit Karma the same employment and retention flexibility as does the United States;

 

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operating in jurisdictions that do not protect intellectual property rights to the same extent as does the United States;

 

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compliance by Credit Karma and its business partners with anti-corruption laws, import and export control laws, tariffs, trade barriers, economic sanctions, and other regulatory limitations on Credit Karma’s ability to provide its platform in certain international markets;

 

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foreign exchange controls that might require significant lead time in setting up operations in certain geographic territories and might prevent Credit Karma from repatriating cash earned outside the United States;

 

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currency exchange restrictions or costs and exchange rate fluctuations;

 

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political and economic instability;

 

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public health emergencies, such as the COVID-19 pandemic and the subsequent public health measures taken to contain it, including restrictions on travel, restrictions on gatherings, and stay-at-home orders;

 

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double taxation of Credit Karma’s international earnings and potentially adverse tax consequences due to changes in the income and other tax laws of the United States or the international jurisdictions in which Credit Karma operates; and

 

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higher costs of doing business internationally, including increased accounting, travel, infrastructure, and legal compliance costs.

Additionally, exposure to U.K. political developments, including Brexit, could have a material adverse effect on Credit Karma. The United Kingdom left the European Union on January 31, 2020 with a transition period through December 31, 2020. Brexit has created an uncertain political, economic and regulatory environment in the United Kingdom and potentially across other EU member states, which may last for a number of months or years. Consequently, no assurance can be given as to the overall impact of Brexit, and whether it could adversely affect Credit Karma’s business, financial condition and results of operations.

Credit Karma is subject to various U.S. and international anti-corruption laws and other anti-bribery and anti-kickback laws and regulations.

Credit Karma is subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”) and other anticorruption, anti-bribery and anti-money laundering laws in the jurisdictions in which Credit Karma does business, both domestic and abroad. These laws generally prohibit Credit Karma and its employees from improperly influencing government officials or commercial parties in order to obtain or retain business, direct business to any person or gain any improper advantage. The FCPA and other applicable anti-bribery and anti-corruption laws also may hold

 

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Credit Karma liable for acts of corruption and bribery committed by its third-party business partners, representatives and agents who are acting on its behalf. Credit Karma and its third-party business partners, representatives and agents may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and Credit Karma may be held liable for the corrupt or other illegal activities of these third-party business partners and intermediaries and Credit Karma’s employees, representatives, contractors and agents, even if Credit Karma does not explicitly authorize such activities. These laws also require that Credit Karma keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions. While Credit Karma has policies and procedures to address compliance with such laws, Credit Karma cannot assure you that its employees and agents will not take actions in violation of Credit Karma’s policies or applicable law, for which Credit Karma may be ultimately held responsible, and Credit Karma’s exposure for violating these laws increases as Credit Karma’s international presence expands and as Credit Karma increases sales and operations in foreign jurisdictions. Any violation of the FCPA or other applicable anti-bribery, anti-corruption and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, imposition of significant legal fees, loss of export privileges, severe criminal or civil sanctions or suspension or debarment from U.S. government contracts, substantial diversion of management’s attention or overall adverse consequences to Credit Karma’s business, all of which may have an adverse effect on Credit Karma’s reputation, business, financial condition and results of operations.

Any failure to offer high-quality support may harm Credit Karma’s relationships with members and partners and could adversely affect Credit Karma’s business, financial condition and results of operations.

Credit Karma’s ability to attract and retain members and partners is dependent in part on its ability to provide high-quality support. Members and partners depend on Credit Karma’s support organization to resolve any issues relating to Credit Karma’s platform. Credit Karma relies on third-parties to provide support services and Credit Karma’s ability to provide effective support is largely dependent on its ability to attract and retain third-party service providers who are not only qualified to support users of Credit Karma’s platform but are also well versed in Credit Karma’s platform. As Credit Karma continues to grow its business and improve its offerings, Credit Karma will face challenges related to providing high-quality support services at scale. Additionally, as Credit Karma continues to grow its international business and the number of international users on its platform, its support organization will face additional challenges, including those associated with delivering support in languages other than English. Any failure to maintain high-quality support, or a market perception that Credit Karma does not maintain high-quality support, could harm Credit Karma’s reputation and adversely affect its ability to scale its platform and business and its financial condition and results of operations.

If Credit Karma experiences significant product accuracy or quality problems, it may adversely affect Credit Karma’s business, financial condition and results of operations.

Growth of Credit Karma’s business significantly depends on data-driven features on Credit Karma’s platform, information that Credit Karma receives from third parties and analyses that it provides to its members and partners. Credit Karma’s business relies on the data provided to Credit Karma by credit reporting bureaus and Credit Karma’s financial services provider partners. The large amount of information Credit Karma uses in operating its platform is critical to the offerings and experience Credit Karma provides for members. If Credit Karma is unable to accurately analyze the data provided to Credit Karma and make appropriate recommendations of financial products to its members, the value that Credit Karma provides to members and partners may be limited.

In addition, if Credit Karma encounters development challenges or discover inaccuracies or errors in its products or features either late in its development cycle or after release, it may cause Credit Karma to delay its product launch date or suspend product availability until such issues can be fixed. Any major defects, launch delays or product suspensions may lead to loss of members and revenue, negative publicity, member and employee dissatisfaction, reduced partner use of Credit Karma’s platform and increased operating expenses. For example, Credit Karma’s tax product has rigid development timetables that increase the risk of errors and is particularly challenging due to the need to incorporate unpredictable and potentially late tax law and tax form changes each year and because Credit Karma’s members expect high levels of accuracy and a timely launch of updates to this product to prepare and file their taxes by the tax filing deadline. Due to the complexity of Credit Karma’s products and the condensed development cycles under which Credit Karma operates, Credit Karma’s products may contain errors that could unexpectedly interfere with the operation of the software or result in incorrect calculations.

 

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Credit Karma primarily relies on third parties to deliver its services to users on its platform, and any disruption of or interference with Credit Karma’s use of third parties could adversely affect Credit Karma’s business, financial condition and results of operations.

Credit Karma currently hosts its platform and supports its operations on datacenters provided by third-party providers of cloud infrastructure services. Credit Karma does not have control over the operations of these facilities. These facilities are vulnerable to damage or interruption from natural disasters, cybersecurity attacks, terrorist attacks, power outages and similar events or acts of misconduct. Credit Karma’s platform’s continuing and uninterrupted performance is critical to its success. Credit Karma has experienced, and expects that in the future it will experience, interruptions, delays and outages in service and availability from time to time due to a variety of factors, including infrastructure changes, human or software errors, website hosting disruptions and capacity constraints. In addition, any changes in service levels of these third parties may adversely affect Credit Karma’s ability to meet the requirements of users on its platform. Since Credit Karma’s platform’s continuing and uninterrupted performance is critical to its success, sustained or repeated system failures would reduce the attractiveness of Credit Karma’s platform. It may become increasingly difficult for Credit Karma to maintain and improve its performance, especially during peak usage times, as Credit Karma expands and the usage of its platform increases. Any negative publicity arising from these disruptions could harm Credit Karma’s reputation and brand and may adversely affect the usage of Credit Karma’s platform. Any of the above circumstances or events may harm Credit Karma’s reputation and brand, reduce the availability or usage of its platform, lead to a significant short-term loss of revenue, increase its costs and impair its ability to attract new users, any of which could adversely affect Credit Karma’s business, financial condition and results of operations.

Credit Karma depends on the interoperability of its platform across third-party applications and services that Credit Karma does not control.

Credit Karma has integrations with a variety of vendors. Third-party applications, products and services are constantly evolving, and Credit Karma may not be able to maintain or modify its platform to ensure its compatibility with third-party offerings following development changes. In the event that it is difficult for Credit Karma’s members to access and use Credit Karma’s products and services, Credit Karma’s business may be materially and adversely affected. For example, Credit Karma’s savings product requires members to use a third party’s services in order to connect a member’s external bank account with a Credit Karma savings account, and usage of this offering could be materially and adversely affected if there were any changes in such third party’s systems that degrade the functionality of Credit Karma’s offering or impose additional costs or requirements on Credit Karma.

In addition, some of Credit Karma’s competitors or partners on Credit Karma’s platform may take actions which disrupt the interoperability of Credit Karma’s platform with their own products or services, or exert strong business influence on Credit Karma’s ability to, and the terms on which Credit Karma, operates and distributes its platform. As Credit Karma’s platform evolves, Credit Karma expects the types and levels of competition to increase. Should any of Credit Karma’s competitors or partners on its platform modify their technologies, standards or terms of use in a manner that degrades the functionality or performance of Credit Karma’s platform or is otherwise unsatisfactory to Credit Karma or gives preferential treatment to competitive products or services, Credit Karma’s platform, business, financial condition and results of operations could be adversely affected.

Internet search engines drive traffic to Credit Karma’s platform and Credit Karma’s new member growth could decline and Credit Karma’s business, financial condition and results of operations would be adversely affected if Credit Karma fails to appear prominently in search results.

Credit Karma’s success depends in part on its ability to attract members through unpaid Internet search results on search engines like Google, Yahoo! and Bing. The number of members Credit Karma attracts to its platform from search engines is due in large part to how and where Credit Karma’s website ranks in unpaid search results. These rankings can be affected by a number of factors, many of which are not under Credit Karma’s direct control and may change frequently. For example, a search engine may change its ranking algorithms, methodologies or design layouts. As a result, links to Credit Karma’s website may not be prominent enough to drive traffic to Credit Karma’s website, and Credit Karma may not know how or otherwise be in a position to influence the results. In some instances, search engine companies may change these rankings in a way that promotes their own competing products or services or the products or services of one or more of Credit Karma’s competitors. Search engines may also adopt a more aggressive auction-pricing system for keywords that would cause Credit Karma to incur higher advertising costs or reduce Credit Karma’s market

 

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visibility to prospective consumers. Credit Karma’s website has experienced fluctuations in search result rankings in the past, and Credit Karma anticipates similar fluctuations in the future. Any reduction in the number of potential users directed to Credit Karma’s platform could adversely affect Credit Karma’s business, financial condition and results of operations.

If Credit Karma is unable to effectively combat the increasing amount and sophistication of fraudulent activities by third parties using Credit Karma’s platform, Credit Karma may suffer losses, which may be substantial, and lose the confidence of its members or partners, or of government agencies and Credit Karma’s business, financial condition and results of operations may be adversely affected.

The online payments and online tax preparation industries have been experiencing an increasing amount of fraudulent activities by third parties, and those fraudulent activities are becoming increasingly sophisticated. Although Credit Karma does not believe that any of this activity is uniquely targeted at its products or services, this type of fraudulent activity may adversely impact Credit Karma’s savings and tax products. In addition to any losses that may result from such fraud, which may be substantial, a loss of confidence of Credit Karma’s members or partners or of governmental agencies in Credit Karma’s ability to prevent fraudulent activity that is perpetrated through its platform may seriously harm its business and damage its brand. If Credit Karma cannot adequately combat such fraudulent activity that is perpetrated through certain of its products and services, governmental authorities may refuse to allow Credit Karma to continue to offer such products and services, which could include federal or state tax authorities refusing to allow Credit Karma to process its members’ tax returns electronically, resulting in a significant adverse impact on Credit Karma’s earnings and revenue. As fraudulent activities become more pervasive and increasingly sophisticated, and fraud detection and prevention measures must become correspondingly more complex to combat them across the various industries in which Credit Karma operates, Credit Karma may implement risk control mechanisms that could make it more difficult for legitimate members to obtain and use Credit Karma’s products and services, which could result in lost revenue and adversely affect Credit Karma’s business, financial condition and results of operations.

Credit Karma’s business could be adversely affected by natural disasters, public health crises, political crises, economic downturns or other unexpected events.

Any significant natural disaster, such as an earthquake, fire, hurricane, tornado, flood or significant power outage, could disrupt Credit Karma’s operations, mobile networks, the Internet or the operations of Credit Karma’s third-party technology providers. In particular, Credit Karma’s corporate headquarters are located in the San Francisco Bay Area, a region known for seismic activity. In addition, any unforeseen public health crises, such as epidemics or another pandemic, political crises, such as terrorist attacks, war and other political instability, or other catastrophic events, whether in the United States or abroad, could adversely affect Credit Karma’s operations or the economy as a whole. Credit Karma has disaster recovery plans but they may not be adequate, depending on the severity of the disaster. The impact of any natural disaster, including another pandemic, act of terrorism or other disruption to Credit Karma or its partners’ or third-party providers’ abilities could adversely affect the economy as a whole, demand for Credit Karma’s services, and Credit Karma’s operations, which could adversely affect Credit Karma’s business, financial condition and results of operations.

The applicability of sales, use and other tax laws or regulations on Credit Karma’s business is uncertain. Adverse tax laws or regulations could be enacted or existing laws could be applied to Credit Karma or its partners or members, which could subject Credit Karma to additional tax liability.

The application of federal, state, local and international tax laws to services provided electronically is evolving. New income, sales, use, value-added or other tax laws, statutes, rules, regulations, or ordinances could be enacted at any time (possibly with retroactive effect) and could be applied solely or disproportionately to services provided over the Internet or could otherwise materially affect Credit Karma’s financial position and results of operations.

 

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Any changes in the U.S. or worldwide income taxation of Credit Karma’s activities may increase Credit Karma’s worldwide effective tax rate and adversely affect Credit Karma’s business, financial condition and results of operations.

Credit Karma’s income tax obligations are based in part on its corporate operating structure, including the manner in which Credit Karma develops, values and uses its intellectual property and the scope of its international operations. Credit Karma is subject to review and audit by U.S. (federal and state) and non-U.S. tax authorities and the laws in those jurisdictions are subject to interpretation. Tax authorities may disagree with and challenge some of the positions Credit Karma has taken and any adverse outcome of such an audit could have a negative effect on Credit Karma’s business, financial condition and results of operations. In addition, Credit Karma’s future income taxes could be adversely affected by earnings being lower than anticipated in jurisdictions that have lower statutory tax rates and higher than anticipated in jurisdictions that have higher statutory tax rates, by changes in the valuation of Credit Karma’s deferred tax assets and liabilities or by changes in tax laws, regulations or accounting principles, as well as certain discrete items. Greater than anticipated tax expenses, or disputes with tax authorities, could adversely impact Credit Karma’s business, financial condition and results of operations. Further, many countries have recently proposed changes to tax laws regarding digital services that could significantly increase Credit Karma’s tax obligations in certain countries where Credit Karma does business or requires Credit Karma to change the manner in which its operates its business.

If Credit Karma’s estimates or judgments relating to its critical accounting policies are based on assumptions that change or prove to be incorrect.

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in Credit Karma’s consolidated financial statements and accompanying notes. Credit Karma bases its estimates on historical experience and on various other assumptions that Credit Karma believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources. Credit Karma’s results of operations could be adversely affected if Credit Karma’s assumptions change or if actual circumstances differ from those in Credit Karma’s assumptions. Significant assumptions and estimates used in preparing Credit Karma’s consolidated financial statements include those related to revenue recognition, stock-based compensation, allowance for doubtful accounts, accounting for internal use software and income taxes.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This consent solicitation statement/prospectus and the documents incorporated herein by reference contain “forward-looking statements” within the meaning of applicable securities laws, including, in particular, statements about plans, objectives and strategies, growth opportunities in a company’s industries and businesses, its expectations regarding future results, financial condition, liquidity and capital requirements, estimates regarding the impact of regulatory developments and legal proceedings, and other trends and projections. These risks and uncertainties may be amplified by the COVID-19 pandemic, which has caused significant economic instability and uncertainty. The extent to which the COVID-19 pandemic impacts Intuit’s and Credit Karma’s businesses, operations, and financial results, including the duration and magnitude of such effects, will depend on numerous evolving factors, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Forward-looking statements are not historical facts and may be identified by words such as “future,” “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “estimate,” “expect,” “predict,” “will,” “would,” “could,” “can,” “may,” and similar terms. These forward-looking statements are based on information available to Intuit, Credit Karma, Merger Sub I and Merger Sub II as of the date of this consent solicitation statement/prospectus and represent management’s current views and assumptions. Forward-looking statements are not guarantees of future performance, events or results and involve known and unknown risks, uncertainties and other factors, which may be beyond the control of Intuit or Credit Karma. Accordingly, actual performance, events or results could differ materially from those expressed or implied in the forward-looking statements due to a number of factors, including, but not limited to, the following:

 

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the Transaction may not be completed on the terms or timeline currently contemplated, or at all, as Intuit or Credit Karma may be unable to satisfy the conditions or obtain the approvals required to complete the Transaction or such approvals may contain material restrictions or conditions;

 

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failure to complete the Transaction could adversely affect the market price of Intuit Common Stock as well as its business, financial condition and results of operations;

 

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certain of Credit Karma directors and executive officers have interests in seeing the Transaction completed that may be different from, or in addition to, those of other Credit Karma stockholders;

 

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the calculation of the consideration for the Merger will not be adjusted if there is a change in the value of the Intuit Common Stock;

 

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the integration of the Credit Karma business into Intuit may not be as successful as anticipated;

 

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Intuit may fail to realize all of the anticipated benefits of the Transaction;

 

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the market price for shares of Intuit Common Stock before and after the completion of the Transaction may be affected by factors different from, or in addition to, those that historically have affected or currently affect the market prices of shares of Intuit Common Stock;

 

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Intuit and Credit Karma must obtain certain regulatory approvals and clearances to consummate the Transaction, which, if delayed, not granted or granted with unacceptable conditions, could prevent, substantially delay or impair consummation of the Transaction, result in additional expenditures of money and resources or reduce the anticipated benefits of the Transaction;

 

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failure to attract, motivate and retain executives and other key employees could diminish the anticipated benefits of the Transaction;

 

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each of Intuit and Credit Karma may incur significant transaction, merger-related and restructuring costs in connection with the Transaction;

 

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third parties may terminate or alter existing contracts or relationships with Intuit or Credit Karma;

 

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•

current Intuit stockholders will have reduced ownership and voting interest in and will exercise less influence over management of Intuit following the Transaction;

 

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while the Transaction is pending, Credit Karma is subject to certain interim operating covenants, including a covenant that requires Credit Karma to maintain its business in the ordinary course, all of which could prohibit Credit Karma from taking certain actions that might otherwise be beneficial to Credit Karma and its stockholders; and

 

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other businesses, financial, operational and legal risks and uncertainties detailed from time to time in Intuit’s SEC filings.

The foregoing list of factors is not exclusive. Additional information concerning these and other risk factors is contained in Intuit’s most recently filed Annual Report on Form 10-K, subsequent Quarterly Report on Form 10-Q, recent Current Reports on Form 8-K, and other SEC filings. All cautionary statements made or referred to herein should be read as being applicable to all forward-looking statements wherever they appear. You should consider the risks and uncertainties described or referred to herein and should not place undue reliance on any forward-looking statements. The forward-looking statements speak only as of the date made, and Intuit and Credit Karma expressly disclaim any obligation to update these forward-looking statements.

 

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SOLICITATION OF WRITTEN CONSENTS

Purpose of the Consent Solicitation

Credit Karma stockholders are being asked to consent to the Merger Agreement proposal and thereby approve the Transaction.

The Credit Karma Board has determined that the Merger Agreement and the Transaction are advisable, fair to, and in the best interests of Credit Karma and its stockholders and adopted and approved the Merger Agreement and the Transaction. The Credit Karma Board recommends that you consent to the Merger Agreement proposal and thereby adopt and approve the Transaction and the Merger Agreement.

The Support Agreements that Intuit has entered into with the certain significant Credit Karma stockholders (each a “Support Stockholder”) obligate each such Support Stockholder, promptly following the Registration Statement being declared effective by the SEC and its receipt of this consent solicitation statement/prospectus, to execute and deliver a Written Consent in respect of all Credit Karma securities beneficially owned by such Support Stockholder adopting the Merger Agreement and approving the Transaction. The shares of Credit Karma Capital Stock that are owned by the Support Stockholders and subject to such Support Agreements represent approximately 66% of the outstanding shares of Credit Karma Common Stock and 56% of the outstanding shares of Credit Karma Preferred Stock, in each case as of the date of the Merger Agreement. The delivery of the Written Consents by the Support Stockholders adopting the Merger Agreement with respect to the Credit Karma securities beneficially owned by the Support Stockholders will be sufficient to adopt the Merger Agreement and thereby approve the Transaction.

Record Date

The Credit Karma Board has set February 24, 2020 as the record date for determining the Credit Karma stockholders entitled to sign and deliver Written Consents with respect to the Merger Agreement proposal.

Credit Karma Stockholders Entitled to Consent

Only Credit Karma stockholders of record holding shares of Credit Karma Capital Stock as of the close of business on the record date are entitled to sign and deliver Written Consents with respect to the Transaction and the Merger Agreement. As of the close of business on the record date, there were 136,353,080 shares of Credit Karma Common Stock outstanding and entitled to sign and deliver Written Consents with respect to the Merger Agreement proposal, as well as 10,837,834 shares of Credit Karma Series A-1 Preferred Stock, 17,077,666 shares of Credit Karma Series A-2 Preferred Stock, 39,750,194 shares of Credit Karma Series B Preferred Stock, 17,193,810 shares of Credit Karma Series C Preferred Stock, and 10,948,119 shares of Credit Karma Series D Preferred Stock. Each share of Credit Karma Common Stock and each share of the Credit Karma Preferred Stock is entitled to one vote. The holders of Credit Karma Common Stock shall vote as a separate class, the holders of Credit Karma Preferred Stock shall vote as a separate class, and the holders of Credit Karma Capital Stock shall vote together as a single class on an as-converted to common stock basis. You are urged to return a completed, dated and signed Written Consent by                Pacific Time on                 , 2020.

Written Consents; Required Written Consents

The approval of the Merger Agreement and the Transaction requires the affirmative vote or consent of holders of at least (i) a majority of the votes represented by all outstanding shares of Credit Karma Common Stock voting as a separate class, (ii) a majority of the votes represented by all outstanding shares of Credit Karma Preferred Stock voting as a separate class and (iii) a majority of the votes represented by all outstanding shares of Credit Karma Capital Stock voting together as a single class on an as-converted to common stock basis, which collectively is referred to in this consent solicitation statement/prospectus as the Requisite Stockholder Approval.

Concurrently with the parties’ entry into the Merger Agreement, each of the Support Stockholders entered into a Support Agreement with Intuit. Under the Support Agreements, each of the Support Stockholders agreed, promptly following the Registration Statement being declared effective by the SEC and its receipt of this consent solicitation statement/prospectus, to execute and deliver a Written Consent with respect to the outstanding shares of Credit Karma Capital Stock held by such Support Stockholder adopting the Merger Agreement and approving the Transaction. The shares of

 

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Credit Karma Capital Stock that are owned by the Support Stockholders and subject to such Support Agreements represent approximately 66% of the outstanding shares of Credit Karma Common Stock and 56% of the outstanding shares of Credit Karma Preferred Stock, in each case as of the date of the Merger Agreement. The delivery of the Written Consents by the Support Stockholders with respect to the shares of Credit Karma Capital Stock that are owned by the Support Stockholders adopting the Merger Agreement will be sufficient to adopt the Merger Agreement and thereby approve the Transaction and will constitute the approval required pursuant to the terms of the Credit Karma Restated Certificate.

Submission of Written Consents

You may consent to the Merger Agreement proposal with respect to your shares of Credit Karma Capital Stock by completing, dating and signing the Written Consent enclosed with this consent solicitation statement/prospectus and returning it to Credit Karma.

If you hold shares of Credit Karma Capital Stock as of the close of business on the record date and you wish to give your Written Consent, you must fill out the enclosed Written Consent, date and sign it, and promptly return it to Credit Karma. Once you have completed, dated and signed the Written Consent, you may deliver it to Credit Karma, by emailing a .pdf copy to consents@creditkarma.com or by mailing your Written Consent to Credit Karma, Inc. at 760 Market Street, 2nd Floor, San Francisco, CA 94102, Attention: Chief Legal Officer.

The Credit Karma Board has set                 Pacific Time on                 , 2020 as the target date for the receipt of Written Consents, which is the date on which Credit Karma expects to receive the Written Consents of the Support Stockholders under the Support Agreements. Credit Karma reserves the right to extend the final date for the receipt of Written Consents beyond                 , 2020. Any such extension may be made without notice to Credit Karma stockholders. Once a sufficient number of consents to adopt the Merger Agreement has been received, the consent solicitation will conclude. The delivery of the Written Consent by the Support Stockholders with respect to the shares of Credit Karma Capital Stock that are owned by the Support Stockholders adopting the Merger Agreement will be sufficient to adopt the Merger Agreement and thereby approve the Transaction.

Credit Karma stockholders should not send stock certificates with their Written Consents. A letter of transmittal and instructions for the surrender of Credit Karma stock certificates or book entry shares will be mailed to the Credit Karma stockholders shortly after the effective time of the Transaction, if the Transaction is approved and adopted.

Executing Written Consents; Revocation of Written Consents

You may execute a Written Consent to approve of the Merger Agreement proposal. A Written Consent to approve the Merger Agreement proposal is equivalent to a vote for such proposal, and if you do not return your Written Consent, it will have the same effect as a vote against the Merger Agreement proposal. If you are a record holder of shares of Credit Karma Capital Stock and you return a signed Written Consent without indicating your decision on the Merger Agreement proposal, you will have consented to such proposal.

If you are a record holder of shares of Credit Karma Capital Stock as of the close of business on the record date, you may change or revoke your Written Consent (subject to any contractual obligations you may otherwise have) at any time prior to                Pacific Time on                 , 2020 (or, if earlier, before the consents of a sufficient number of shares to approve the Merger Agreement proposal have been delivered to the Chief Legal Officer of Credit Karma). If you wish to change or revoke your consent before that time, you may do so by sending a new Written Consent with a later date or by delivering a notice of revocation, in either case by emailing a .pdf copy to consents@creditkarma.com or by mailing it to Credit Karma, Inc. at 760 Market Street, 2nd Floor, San Francisco, CA 94102, Attention: Chief Legal Officer. However, pursuant to the Support Agreements, the Written Consent to be received by Credit Karma from the Support Stockholders will be irrevocable prior to the earlier of the effective time of the Transaction or the termination of the Merger Agreement.

 

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Credit Karma stockholders should not send stock certificates with their Written Consents. A letter of transmittal and instructions for the surrender of Credit Karma stock certificates or book entry shares will be mailed to the Credit Karma stockholders shortly after the effective time of the Transaction, if the Transaction is approved and adopted.

Solicitation of Written Consents; Expenses

The expense of preparing, printing and mailing these consent solicitation materials is being borne by Credit Karma. Officers and employees of Credit Karma may solicit consents by telephone and personally, in addition to solicitation by mail. These persons will receive their regular salaries but no special compensation for soliciting consents.

 

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THE TRANSACTION

The following is a description of the material aspects of the Transaction. While Intuit and Credit Karma believe that the following description covers the material aspects of the Transaction, the description may not contain all of the information that is important to you. Intuit and Credit Karma encourage you to carefully read this entire consent solicitation statement/prospectus, including the Merger Agreement attached to this consent solicitation statement/prospectus as Annex A, for a more complete understanding of the Transaction.

Structure of the Transaction

The Merger Agreement provides, among other matters, for the acquisition of Credit Karma pursuant to two successive mergers, on the terms and subject to the conditions in the Merger Agreement and in accordance with the DGCL and the Delaware Limited Liability Company Act (the “DLLCA”). At the effective time of the Transaction, Merger Sub I will be merged with and into Credit Karma, with Credit Karma continuing as the Surviving Corporation in the First Merger and as a wholly owned subsidiary of Intuit. Immediately following the First Merger, Credit Karma, as the Surviving Corporation of the First Merger, will merge with and into Merger Sub II, with Merger Sub II continuing as the Surviving Company in the Second Merger and as a wholly owned subsidiary of Intuit.

Merger Consideration to Credit Karma Stockholders

At the effective time of the Transaction, each share of Credit Karma Capital Stock issued and outstanding immediately prior to the effective time of the Transaction (except for shares owned by Credit Karma, Intuit, the Merger Subs or any direct or indirect wholly owned subsidiary of Credit Karma or Intuit immediately prior to the effective time of the Transaction) will be converted into the right to receive consideration, 50% of which will be paid in cash and 50% of which will be paid in shares of Intuit Common Stock, which consideration is referred to in this consent solicitation statement/prospectus as the per share closing consideration, along with the right to receive certain adjustment amounts and distributions.

Upon the terms and subject to the conditions set forth in the Merger Agreement and subject to certain adjustments and post-closing distributions described more fully in this consent solicitation statement/prospectus, the per share closing consideration will consist of:

 

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An amount in cash equal to (i) the quotient of the aggregate cash consideration, divided by the number of fully diluted shares of Credit Karma Common Stock, including shares of Credit Karma Common Stock issuable upon conversion or exercise in full of all shares of Credit Karma Preferred Stock, Credit Karma RSUs and Credit Karma Options (whether vested or unvested) (the “Fully Diluted Common Number”) , minus (ii) 50% of the per share escrow amount; and

 

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A number of shares of Intuit Common Stock equal to (i) the quotient of the aggregate stock consideration, divided by the Fully Diluted Common Number, minus (ii) 50% of the quotient of the per share escrow amount, divided by $299.7306 (an amount calculated using Intuit Common Stock’s daily volume-weighted average sales price per share for each of the ten consecutive trading days ending on and including the trading day immediately prior to the signing of the Merger Agreement).

In this consent solicitation statement/prospectus, the terms “aggregate merger consideration,” “aggregate cash consideration,” “aggregate stock consideration” and “per share escrow amount” are defined as follows:

 

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the “aggregate merger consideration” means (i) $6,600,000,000 minus (ii) the sum of (a) the estimated closing indebtedness, (b) the estimated unpaid Credit Karma transaction expenses and (c) the Securityholder Expense Fund (as defined below), plus (iii) the sum of (a) the estimated closing cash, (b) the closing working capital adjustment amount and (c) the aggregate amount of the exercise prices payable upon the exercise in full of Credit Karma Options (whether vested or unvested) outstanding immediately prior to the effective time of the Transaction, plus (iv) the Indemnity Escrow Fund (as defined below);

 

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the “aggregate cash consideration” means an amount in cash equal to one-half of the aggregate merger consideration;

 

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the “aggregate stock consideration” means a number of shares of Intuit Common Stock equal to the quotient of one half of the aggregate merger consideration divided by $299.7306; and

 

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the “per share escrow amount” means an amount equal to the quotient of (i) $500,000,000, divided by (ii) the number of fully diluted shares of Credit Karma Common Stock, including shares of Credit Karma Common Stock issuable upon conversion or exercise in full of all shares of Credit Karma Preferred Stock and vested (but not unvested) Credit Karma RSUs and Credit Karma Options.

Background of the Transaction

Each of Intuit and Credit Karma periodically evaluate opportunities to achieve their long-term operational and financial goals and to enhance stockholder value through potential strategic transactions, including business combinations, divestitures, acquisitions and similar transactions. As part of Intuit’s ongoing evaluation of such opportunities, Intuit’s senior management identified Credit Karma as a potential candidate for a strategic transaction with Intuit.

On July 21, 2018, Anton Hanebrink, Executive Vice President, Chief Corporate Strategy & Development Officer at Intuit was introduced by Qatalyst Partners via email to Kenneth Lin, Founder and Chief Executive Officer at Credit Karma. In an email exchange between Messrs. Hanebrink and Lin, Mr. Hanebrink expressed an interest in arranging a meeting to explore ways that Credit Karma and Intuit might be able to work together. The parties agreed to meet on August 16, 2018 to explore the topic.

On August 16, 2018, Mr. Lin and Sonali Tanor, Vice President for Revenue Strategy at Credit Karma, Mr. Hanebrink and Greg Johnson, Executive Vice President and General Manager – Consumer Group at Intuit, had an initial in-person meeting to discuss a potential strategic partnership between the companies. During the meeting, Mr. Hanebrink also asked whether Credit Karma would be open to considering a potential acquisition of the company by Intuit. In response, Mr. Lin observed that Credit Karma was not for sale but noted that he would be willing to discuss the matter further with Intuit.

Between August 28, 2018 and September 27, 2018, Messrs. Lin and Hanebrink had several in-person meetings and calls to discuss a potential transaction between Credit Karma and Intuit, including a strategic partnership or a potential acquisition transaction. Mr. Johnson and Joe Kauffman, Credit Karma’s Chief Financial Officer, attended in person or telephonically the meetings on August 28, 2018 and September 27, 2018.

On September 20, 2018, Messrs. Lin and Hanebrink had a telephone call in which Mr. Lin indicated that any proposal to acquire Credit Karma would have to value Credit Karma at no less than $8 billion. Mr. Hanebrink responded that Intuit would have to conduct further due diligence and analysis before developing a definitive view of Credit Karma’s valuation.

On October 5, 2018, Mr. Hanebrink called Mr. Lin to inform him of Intuit’s continued interest in a potential acquisition of Credit Karma but noted that Intuit was still conducting due diligence and analysis on a potential transaction and once that was completed, Intuit would need to obtain the approval of Intuit’s board of directors before submitting a proposal. Mr. Hanebrink did not give Mr. Lin any specific guidance on Intuit’s expected timing.

On October 10, 2018, at the request of Sasan K. Goodarzi, then Executive Vice President and General Manager – Small Business Group and currently Chief Executive Officer at Intuit, Mr. Lin met with Mr. Goodarzi and Mr. Johnson to discuss a potential acquisition of Credit Karma by Intuit. During this meeting, Messrs. Goodarzi, Johnson and Lin discussed their strategic visions for their respective businesses and various ways in which the two companies could approach the market as a combined business. Following this discussion, Messrs. Goodarzi and Johnson expressed their enthusiasm for a potential acquisition of Credit Karma and they all agreed to continue discussions. Mr. Goodarzi suggested that his team meet with Mr. Lin and his team to continue Intuit’s due diligence on Credit Karma’s business and financial performance in order to facilitate Intuit’s evaluation of a potential transaction. Following this meeting, Mr. Lin apprised members of the Credit Karma Board of the meeting.

On October 19, 2018, Intuit engaged Qatalyst Partners as its financial advisor in connection with a potential acquisition of Credit Karma.

 

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On October 22, 2018, Messrs. Johnson and Lin met at the Money20/20 conference in Las Vegas, Nevada to discuss the potential for a strategic partnership between Intuit and Credit Karma and similarities in the parties’ respective strategic visions.

On October 23, 2018, Messrs. Lin, Kauffman and Hanebrink met in person at Credit Karma’s headquarters to update Mr. Hanebrink and his team on Credit Karma’s business and financial performance, with additional representatives of Intuit and Credit Karma and their respective financial advisors from Qatalyst Partners and Goldman Sachs attending in person or telephonically.

During the weeks that followed, representatives of Goldman Sachs, Qatalyst Partners, and Intuit engaged in numerous discussions regarding due diligence matters and the exchange of Credit Karma due diligence information with Intuit.

On November 20, 2018, the Credit Karma Board held a meeting during which, among other things, the board discussed the status of Credit Karma’s discussions with Intuit, potential next steps and related matters.

On December 14, 2018, the Acquisition Committee of the Intuit Board held a meeting during which, among other things, the Acquisition Committee discussed the potential acquisition of Credit Karma with members of Intuit’s senior management and representatives of Qatalyst Partners.

On December 18, 2018, Messrs. Lin and Goodarzi had a call to discuss the progress of discussions regarding the potential acquisition transaction and next steps regarding the potential transaction but no material engagement occurred for the remainder of the year.

On December 20, 2018, the Credit Karma Board held a meeting during which, among other things, Messrs. Lin and Kauffman updated the board on the status of discussions with Intuit and the strategic rationale and views of Intuit concerning a potential transaction.

On January 20, 2019, representatives of Goldman Sachs called representatives of Qatalyst Partners to request an update on Intuit’s current thinking regarding a potential acquisition transaction with Credit Karma. Following this call, Mr. Goodarzi called Mr. Lin on January 23, 2019 to inform him that the Intuit Board would require additional time to consider a potential transaction in the context of Intuit’s overall strategic priorities and that such deliberations would likely take a few months.

On January 30, 2019, the Credit Karma Board held a meeting during which, among other things, Mr. Lin led a discussion regarding the status of a potential transaction with Intuit, including a general update on the most recent discussions that had taken place.

On March 18, 2019, Messrs. Goodarzi, Johnson and Lin met in person to provide insights into their respective companies’ business culture and the parties’ respective strategic visions.

On May 7, 2019, Mr. Goodarzi called Mr. Lin to express interest in renewing discussions regarding a potential acquisition of Credit Karma. During the call, Mr. Goodarzi informed Mr. Lin of his intention to present a non-binding indication of interest regarding a potential acquisition of Credit Karma to the Intuit Board for its consideration. Mr. Goodarzi mentioned that, in order to obtain the Intuit Board’s support for such an acquisition, Mr. Goodarzi’s team would need updated information on Credit Karma’s business and financial performance in order to refresh Intuit’s valuation analysis for a potential transaction. Mr. Goodarzi did not express a view on a valuation of Credit Karma during the call but Mr. Lin agreed to arrange a meeting with members of the Credit Karma management team to provide information on Credit Karma’s business and recent financial performance to facilitate Intuit’s valuation analysis. Mr. Lin believed that doing so would increase the likelihood of receiving an acceptable proposal on valuation from Intuit. Following this call, Mr. Lin informed members of the Credit Karma Board of Mr. Goodarzi’s call.

On May 28, 2019, the Credit Karma Board held a meeting during which, among other things, the board discussed the latest developments relating to the ongoing discussions with Intuit, various considerations related to pursuing a transaction with Intuit, potential next steps and related matters, as well as a general overview of other third parties potentially interested in acquiring Credit Karma.

 

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On June 6, 2019, Mr. Kauffman, Rama Katkar, Senior Vice President, Corporate Development & Business Operations at Credit Karma, and other members of Credit Karma management, had a conference call with Mr. Hanebrink and Shveta Mujumdar, Vice President of Corporate Strategy and Development at Intuit to review Credit Karma’s business and recent financial performance. Representatives of Qatalyst Partners and Goldman Sachs also attended this conference call.

On June 18, 2019, Messrs. Johnson, Hanebrink and Lin had a telephone call to discuss Credit Karma’s business updates and financial performance for the first quarter of 2019 and the drivers of Credit Karma’s business. The parties also discussed their respective long-term strategic visions and potential ways in which Credit Karma and Intuit could jointly drive value to their businesses.

On June 21, 2019, Mr. Lin had a conversation with a representative of a large software company (“Company A”) about a potential transaction with Credit Karma.

A representative from Company A contacted Mr. Lin on July 1, 2019 to express interest in exploring a possible acquisition of Credit Karma. Mr. Lin responded that Credit Karma was not for sale but he was willing to discuss a potential transaction with Company A and would raise the matter with the Credit Karma Board. Shortly thereafter, Mr. Lin informed members of the Credit Karma Board of Company A’s call.

On July 9, 2019, Mr. Goodarzi called Mr. Lin to inform him that the Intuit Board supported further exploration of a potential acquisition of Credit Karma and that Intuit was likely to deliver a nonbinding proposal regarding an acquisition of Credit Karma in the coming weeks. Mr. Goodarzi did not convey Intuit’s view on Credit Karma’s valuation during the call. Shortly thereafter, Mr. Lin informed members of the Credit Karma Board of Mr. Goodarzi’s call.

On July 12, 2019, representatives of Credit Karma had a call with representatives of Company A to discuss Credit Karma’s business and financial performance and a potential acquisition of Credit Karma by Company A. During this call, representatives of Company A did not make an acquisition proposal.

On July 15, 2019, Mr. Lin met with a senior executive of Company A to further discuss a potential acquisition of Credit Karma. During this meeting, Company A’s senior executive did not make an acquisition proposal.

On July 21, 2019, Credit Karma received a nonbinding letter of intent from Intuit in which Intuit proposed to acquire Credit Karma for $5.8 billion on a cash-free, debt-free basis, 50% of which would be payable in cash and 50% of which would be payable in Intuit stock (valued prior to the announcement of a transaction), and seeking a period of exclusivity in which to complete its confirmatory due diligence and negotiate definitive agreements for the proposed transaction. Intuit’s letter of intent also indicated that Intuit would grant up to $250 million of new RSUs to Credit Karma’s employees at the consummation of the transaction in order to retain Credit Karma’s employees. The foregoing nonbinding letter of intent was promptly delivered to the Credit Karma Board.

On July 24, 2019, the Credit Karma Board met to consider Intuit’s letter of intent. Representatives of Goldman Sachs attended the meeting. During the meeting, Goldman Sachs discussed its preliminary financial analysis of Intuit’s proposed transaction value in comparison to Credit Karma’s stand-alone enterprise value, which included a potential valuation of Credit Karma following an initial public offering or direct listing of its stock. Following discussions with Credit Karma management, the board decided to reject Intuit’s proposal. Following this meeting, representatives of Credit Karma informed Intuit that Credit Karma was not interested in pursuing a transaction on the terms of Intuit’s proposal. There was no further contact between representatives of Intuit and representatives of Credit Karma concerning a potential acquisition or other transaction between the two companies until October 2019.

 

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On August 9, 2019, at Company A’s request, Messrs. Lin and Kauffman met with senior executives of Company A to further discuss a potential acquisition of Credit Karma by Company A. During this meeting, Company A’s senior executives expressed interest in pursuing an acquisition of Credit Karma and their view of strategic and cultural rationale but did not make an acquisition proposal. Mr. Lin and a representative of Company A spoke again about a potential transaction on August 28 and 29, 2019 but Credit Karma never received a transaction proposal from Company A.

On October 29, 2019, at Mr. Goodarzi’s request, Mr. Lin met with Mr. Goodarzi to discuss the possibility of restarting their discussions regarding a potential acquisition of Credit Karma. At this meeting, Mr. Lin shared an update on Credit Karma’s revenue outlook as well as expense reductions that Credit Karma was considering to improve profitability. Mr. Goodarzi expressed Intuit’s continued interest in an acquisition transaction and indicated that he would be speaking to his team about re-engaging with Credit Karma.

On November 20, 2019, at Intuit’s request, Mr. Kauffman and Ms. Katkar had a telephone call with Mr. Hanebrink and Ms. Mujumdar to review Credit Karma’s business outlook and financial performance for the third quarter of 2019. They also discussed certain cost-saving initiatives undertaken by Credit Karma intended to increase the profitability of its business.

Over the course of the next several days, representatives of Intuit and Credit Karma held a number of additional follow-on meetings to further discuss Credit Karma’s business and financial performance, as well as the anticipated financial impact of the above-referenced expense reductions.

On November 26, 2019, Mr. Goodarzi called Mr. Lin to inform him that Intuit would be sending a revised letter of intent for a proposed acquisition of Credit Karma reflected an increased valuation of Credit Karma. The following day, on November 27, 2019, Credit Karma received a revised letter of intent from Intuit contemplating the acquisition of Credit Karma for $7 billion on a cash-free, debt- free basis, 50% of which would be payable in cash and 50% of which would be payable in Intuit stock (valued prior to the announcement of a transaction), and seeking a period of exclusivity in which to complete its confirmatory due diligence and negotiate definitive agreements for the proposed transaction. Intuit’s letter of intent also indicated that Intuit would grant up to $250 million of new RSUs to Credit Karma’s employees at the consummation of the transaction in order to retain Credit Karma’s employees. The foregoing nonbinding letter of intent was promptly delivered to the Credit Karma Board.

On November 30, 2019, the Credit Karma Board held a meeting to discuss Intuit’s November 26 letter of intent. Representatives of Goldman Sachs attended the meeting and discussed its preliminary financial analysis of Intuit’s proposed transaction value in comparison to Credit Karma’s stand-alone enterprise value. In this regard, Goldman Sachs observed that Intuit’s proposal equated to an equity valuation of Credit Karma equal to approximately $7.5 billion given that Credit Karma’s stockholders would receive the benefit of Credit Karma’s approximately $500 million of expected net cash. Goldman Sachs also discussed market statistics on other key terms of Intuit’s transaction terms, including terms relating to key employee retention, various closing conditions, regulatory-related terms (e.g., regulatory-related termination fees) and the scope of Intuit’s post-closing indemnification rights and escrow arrangements. Goldman Sachs also reviewed illustrative tax implications of Intuit’s proposal on Credit Karma stockholders as a result of the stock component of the consideration being offered by Intuit. Finally, Goldman Sachs discussed market statistics and analyst outlook on Intuit’s stock price, which the board considered to inform its assessment of the stock component of the consideration being offered by Intuit. After the discussion with Goldman Sachs, the board discussed key terms of Intuit’s proposal and potential responses and revisions to it. After discussion, the board authorized Mr. Lin and Goldman Sachs to seek improvements in the terms of Intuit’s proposal consistent with the board’s discussion. The board then discussed the advisability of contacting Company A and other companies that could reasonably be expected to have interest in acquiring Credit Karma. In this regard, Mr. Lin, members of the board and representatives of Goldman Sachs discussed various interactions with many of these companies over the previous year regarding a potential strategic transaction with Credit Karma, as well as their own views on the likelihood that each of them would have strategic interest in acquiring Credit Karma at the time on terms that placed a higher valuation on Credit Karma than those being proposed by Intuit in its latest letter of intent. After a lengthy discussion, the board determined not to contact any third parties at this time

 

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and instead directed Mr. Lin and Goldman Sachs to focus on improving Intuit’s offer through negotiations using the prospect of a potential initial public offering as the principal strategic alternative to Intuit’s proposal. Notwithstanding the foregoing, the board did not wish to make a final decision regarding outreach to third parties, and therefore, instructed Mr. Lin and Goldman Sachs to inform Intuit that the board was not willing to enter into an exclusivity agreement with Intuit on the basis of its current proposal.

Following Credit Karma’s board meeting, representatives of Credit Karma, consisting principally of Messrs. Lin and Kauffman and Ms. Katkar, and representatives of Intuit, consisting principally of Messrs. Goodarzi and Hanebrink and Ms. Mujumdar, engaged in periodic discussions regarding the key terms of Intuit’s proposed transaction, including the proposed valuation of Credit Karma in the transaction, retention of employees (including Mr. Lin), closing conditions to the transaction, Intuit’s post-closing indemnification rights and the allocation of regulatory risk in the transaction. Throughout this period, Mr. Lin reported on the progress of his negotiations with Intuit to members of the Credit Karma Board and received feedback, recommendations and suggestions on terms under negotiation. Members of the Credit Karma Board who did not participate in such discussions were regularly updated as to the status of the discussions as well.

On December 7, 2019, representatives of Goldman Sachs and Qatalyst Partners had a call to discuss certain aspects of Intuit’s letter of intent, including valuation of Credit Karma in the transaction, employee retention (including the overall size of the retention grants proposed by Intuit), Intuit’s post-closing indemnification rights and the size of the escrow holdback securing those indemnification rights, regulatory-related issues, including the size of the termination fee payable by Intuit in certain circumstances.

On December 10, 2019, Credit Karma received a revised letter of intent from Intuit reflecting Intuit’s response to the foregoing discussions and negotiations, which contemplated the acquisition of Credit Karma for $7.1 billion on a cash-free, debt- free basis, 50% of which would be payable in cash and 50% of which would be payable in Intuit stock (valued prior to the announcement of a transaction). Intuit’s letter of intent also indicated that Intuit would grant up to $300 million of new RSUs to Credit Karma’s employees at the consummation of the transaction in order to retain Credit Karma’s employees. Intuit also proposed a period of exclusivity in which to complete its confirmatory due diligence and negotiate definitive agreements for the proposed transaction. The foregoing nonbinding letter of intent was promptly delivered to the Credit Karma Board.

Over the following two days, Mr. Lin spoke to members of the Credit Karma Board regarding the terms of Intuit’s December 10 letter of intent and was given feedback, recommendations and suggestions on terms under negotiation.

Over the course of the next several days, while their respective teams engaged on the details of Intuit’s revised proposal, Messrs. Goodarzi and Lin spoke several times by telephone to discuss the overall status of negotiations as well as key terms and issues being negotiated by the parties.

On December 13, 2019, representatives of Goldman Sachs and Qatalyst Partners had a call to discuss the key terms in Intuit’s December 10 letter of intent, including valuation of Credit Karma in the transaction, employee retention (including the overall size of the retention grants proposed by Intuit), Intuit’s post-closing indemnification rights and the size of the escrow holdback securing those indemnification rights, regulatory-related issues, including the size of the termination fee payable by Intuit in certain circumstances.

On December 18, 2019, Messrs. Goodarzi and Lin spoke by telephone to discuss a potential resolution of key terms and issues that had not been resolved by the negotiation teams. Subsequently, through the remainder of December 18 and December 19, 2019, Mr. Hanebrink and Ms. Mujumdar, on behalf of Intuit, and Mr. Kaufman and Ms. Katkar, on behalf of Credit Karma, had various discussions in an attempt to resolve the key terms and issues discussed by Messrs. Goodarzi and Lin consistent with their conversation.

On December 19, 2019, the Credit Karma Board held a meeting to discuss Intuit’s December 10 letter of intent and revisions to it that had been negotiated by the parties since its initial delivery. Goldman Sachs and a representative of Skadden, Arps, Slate, Meagher & Flom LLP, Credit Karma’s legal counsel for the transaction (“Skadden”), also attended this meeting. Goldman Sachs and Skadden outlined key terms of the Intuit letter of intent and the board asked questions to clarify certain matters. In this regard, Goldman Sachs observed that Intuit’s latest proposal represented an equity value of approximately $7.6 billion in light of the fact that Credit Karma’s stockholders would receive the benefit of Credit Karma’s approximately

 

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$500 million of expected net cash. In addition, Goldman Sachs noted that, when the $300 million of employee retention was factored into the transaction value, Intuit’s latest proposal contemplated transaction consideration of almost $8 billion. The board then revisited its earlier discussion regarding the advisability of contacting Company A or any other companies that could reasonably be expected to have interest in acquiring Credit Karma. After discussion, on the basis of interactions with numerous industry participants and the board’s own knowledge of the market, the board determined that no other companies were likely to pursue an acquisition of Credit Karma at the time at a price or on terms that were more favorable to Credit Karma than those being proffered by Intuit in its latest letter of intent. As a result, the board determined not to contact any third parties at that time and directed Mr. Lin and Goldman Sachs to focus on improving Intuit’s offer through negotiations. After discussion, the Credit Karma Board authorized the company to enter into the exclusivity agreement proposed by Intuit on the basis of the terms reflected in the Intuit letter of intent presented to the board. Finally, in an effort to ensure continuing real-time board involvement in the ongoing negotiations with Intuit, the board established a transaction committee consisting of Messrs. Bingle, Lawee and Lin to oversee negotiations with Intuit and provide Mr. Lin with board support in those efforts.

On December 19, 2019, Credit Karma and Intuit entered into an exclusivity agreement providing for exclusive negotiations through February 24, 2020, subject to the terms thereof.

During the weeks of January 13, 2020 through February 24, 2020, representatives of Credit Karma and representatives of Intuit, together with their respective financial advisors and outside legal counsel, had numerous meetings and calls to discuss matters relating to due diligence as well as growth planning for Credit Karma following the closing of the proposed transaction.

On January 15, 2020, Messrs. Lin and Kauffman, Susannah Wright, Chief Legal Officer of Credit Karma, Colleen McCreary, Chief People Officer of Credit Karma, Ryan Graciano, Chief Technology Officer at Credit Karma, Ms. Katkar, and other representatives of Credit Karma met with Mr. Hanebrink, Ms. Mujumdar, Mark Flournoy, Chief Accounting Officer of Intuit and other representatives of Intuit at the office of Latham & Watkins LLP (“Latham”), Intuit’s outside legal counsel, in San Francisco. At the meeting, representatives of Credit Karma gave a management presentation in response to Intuit’s due diligence questions.

On January 21, 22, and 23, 2020, Mr. Lin and other representatives of Credit Karma, including those who attended the meeting on January 15, 2020, had additional in-person meetings with Mr. Hanebrink and other representatives of Intuit to continue due diligence discussions.

On January 22, 2020, a representative of Latham sent an initial draft of a proposed definitive Merger Agreement to representatives of Skadden.

On January 24, 2020, Messrs. Johnson and Lin met in person to discuss their strategic visions for the consumer group of a combined company.

On February 5, 2020, a representative of Skadden provided a revised draft of the definitive Merger Agreement to representatives of Latham. Between February 5, 2020 and February 24, 2020, representatives of Skadden and representatives of Latham exchanged drafts of the Merger Agreement and ancillary transaction documents, and together with representatives of Credit Karma and Intuit, held various telephonic discussions to negotiate the terms of the Merger Agreement and other definitive agreements for the transaction.

On February 14, 2020, Mr. Kauffman, Ms. Wright and Ms. Katkar, together with certain members of the Credit Karma Board and certain other representatives of Credit Karma and Goldman Sachs held a teleconference with Messrs. Goodarzi and Hanebrink, Ms. Mujumdar, Michelle Clatterbuck, Executive Vice President and Chief Financial Officer at Intuit, and certain other representatives of Intuit and Qatalyst Partners, to review Intuit’s financial performance for the second quarter of Intuit’s fiscal year ended July 31, 2020. Intuit provided information responsive to Credit Karma’s reverse due diligence queries regarding the Intuit business during the call. On the same day, Messrs. Lin and Goodarzi met in person to discuss the status of negotiations on the proposed transaction.

 

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On February 17, 2020, Messrs. Lin and Kauffman, Ms. Wright, Ms. Katkar, certain members of the Credit Karma Board and other representatives of Credit Karma and Goldman Sachs had a call with Mr. Hanebrink, Ms. Mujumdar, Ms. Clatterbuck, and other representatives of Intuit and Qatalyst Partners to discuss Credit Karma’s further reverse due diligence questions regarding Intuit’s business operations.

On February 19, 2020, Messrs. Lin and Kauffman and Ms. Katkar met with Mr. Hanebrink and Ms. Mujumdar at Latham’s offices to discuss a number of key terms that remained under negotiation in the definitive Merger Agreement. Representatives of Goldman Sachs and Qatalyst Partners joined parts of these discussions via telephone.

On February 21, 2020, the Intuit Board held a special meeting and unanimously approved the Merger Agreement and the transactions contemplated thereby.

On February 24, 2020, the Credit Karma Board held a special meeting and unanimously approved, and resolved to recommend to the stockholders of Credit Karma that they adopt and approve the Merger Agreement and the transactions contemplated thereby.

Following these meetings, on February 24, 2020, Intuit and Credit Karma signed the definitive Merger Agreement. On the same day, following the close of market, Intuit issued a press release announcing the transaction.

The Intuit Board’s Reasons for the Transaction

In evaluating the Transaction, the Intuit Board, in consultation with Intuit’s senior management and its financial and legal advisors, invested considerable time and engaged in numerous discussions regarding the Transaction and received various materials for review and consideration in the months preceding the execution of the Merger Agreement. After consideration, at a meeting held on February 21, 2020, the Intuit Board unanimously determined that the Merger Agreement and the Transaction were fair to and in the best interests of Intuit and its stockholders and approved the Merger Agreement and the Transaction, upon the terms and subject to the conditions set forth therein.

In reaching its decision to approve and declare advisable the Merger Agreement, the Intuit Board considered a variety of factors, including its knowledge of Intuit’s business, operations, financial condition, earnings and prospects, as well as the risks in achieving those prospects, including uncertainties associated with achieving financial forecasts. In making its determination, the Intuit Board focused, among other things, on the following material factors (not necessarily in order of relative importance):

 

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Strategy: The Intuit Board considered the strategic and transformative nature of the Transaction, combining two leading financial technology companies focused on consumer finances, to have an expected significant positive impact on consumers and their management of personal finances.

 

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Mission Alignment: The Intuit Board considered management’s belief that Intuit and Credit Karma are aligned in their commitment to solving similar consumer finance problems, and Credit Karma’s vision of helping consumers make meaningful financial progress is aligned with Intuit’s mission of powering prosperity around the world as well as Intuit’s strategy of unlocking smart money decisions.

 

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Product Expansion: The Intuit Board considered management’s belief that the addition of Credit Karma’s products to Intuit’s platform would increase Intuit’s ability to serve consumers by offering more complete solutions through enhanced products across mobile and web, an expanded range of consumer financial solutions and increased innovation and investment in technology and, as a result, will accelerate the revenue growth of the combined company and increase Intuit’s potential for improved financial performance and operations.

 

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Consumer Engagement at Scale: The Intuit Board considered management’s belief that Intuit will benefit from Credit Karma’s expertise in driving year-round consumer engagement at scale and increasing consumer engagement over time.

 

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Monetization Model: The Intuit Board considered management’s belief that Intuit would benefit from the beyond user paid monetization model and expertise that Credit Karma has built through its financial marketplace.

 

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Combined Data: The Intuit Board considered management’s belief that combining Intuit’s and Credit Karma’s data would allow Intuit (with user consent) to create a more intelligent platform with richer data that could lead to increased cost savings and actionable insights for consumers and more effective customer acquisition for the financial partners who participate in the marketplace.

 

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New Talent: The Intuit Board considered management’s belief that Intuit will benefit from Credit Karma’s broad base of talent, including Credit Karma’s senior management team and sizeable technology and data science teams.

 

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Reputation: The Intuit Board considered the strength of Credit Karma’s brand equity and consumer trust.

 

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Earnings Impact: The Intuit Board considered management’s expectation that the Transaction would be neutral to accretive to Intuit’s non-GAAP earnings per share beginning in the first full fiscal year following completion of the Transaction.

 

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Fixed Exchange Ratio: The Intuit Board considered the fact that the Merger Agreement provides for a fixed exchange ratio for the equity component of the aggregate merger consideration and that no adjustment will be made to the equity component of the aggregate merger consideration to the extent the trading price of Intuit Common Stock decreased following the announcement of the Transaction.

 

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Market Impact: The Intuit Board considered the potential market reaction following the announcement of the Transaction and its potential impact on the price of Intuit Common Stock in the short- and long-term.

 

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Merger Agreement: The Intuit Board considered the terms of the Merger Agreement, which resulted from arm’s-length negotiations between Intuit and its advisors, on the one hand, and Credit Karma and its advisors, on the other hand, including management’s assessment of likelihood that the Transaction would be consummated, based on, among other factors:

 

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the conditions to closing in the Merger Agreement;

 

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the commitment by Intuit and Credit Karma to use reasonable best efforts to obtain regulatory clearances, subject to certain limitations;

 

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the likelihood of receiving the required stockholder and regulatory approvals and of completing the Transaction on the anticipated schedule;

 

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the availability of indemnification from Credit Karma’s equityholders, supported by an escrow fund of $500 million, to compensate Intuit for certain losses that could be incurred by Intuit in connection with the Transaction; and

 

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the circumstances under which the Merger Agreement could be terminated and the impact of such a termination. See “The Merger Agreement—Termination of the Merger Agreement” beginning on page 111 of this consent solicitation statement/prospectus.

 

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Support Agreements: The Intuit Board considered the terms of the Support Agreements entered into in connection with the execution of the Merger Agreement, including the commitment (subject to the terms of the Support Agreements) by the Credit Karma stockholders party thereto to vote in favor of the Merger Agreement and approve the Transaction with respect to the shares of Credit Karma Capital Stock owned by them, which represents in the aggregate more than a majority of the total shares of Credit Karma Capital Stock outstanding.

 

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Vesting Agreement: The Intuit Board considered the terms of the Vesting Agreement entered into in connection with the execution of the Merger Agreement pursuant to which Mr. Lin has agreed to be subject to vesting conditions with respect to a portion of the Intuit Common Stock that Mr. Lin will receive at the completion of the Transaction and which is intended to incentivize Mr. Lin to remain an employee and provide important stability to the leadership and governance of the Surviving Company following the completion of the Transaction.

 

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Due Diligence: The Intuit Board considered the results of the due diligence reviews of Credit Karma and its businesses conducted by Intuit and its financial, legal and other advisors.

 

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Available Alternatives: The Intuit Board considered management’s expectation that the Transaction is more favorable to Intuit stockholders than the potential value that might result from Intuit otherwise continuing to pursue its existing strategic plans without the Transaction or from other potential alternative transactions reasonably available to Intuit.

 

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Credit Rating: The Intuit Board considered the credit rating that Intuit is expected to have after incurring the interim or long-term indebtedness, if any, necessary to finance the cash portion of the aggregate merger consideration.

 

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Intuit’s Financial Guiding Principles: The Intuit Board considered Intuit’s Financial Guiding Principles and the impact to them that would occur as a result of the Credit Karma acquisition, including maintaining a strong balance sheet.

 

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Financial health of the Credit Karma Business: The Intuit Board considered the financial health of Credit Karma’s business, including the growth drivers of the various verticals that Credit Karma operates inclusive of credit cards, personal loans, auto, home and savings, as well as the investment needed to grow these verticals.

The Intuit Board also considered a number of countervailing uncertainties and risks in its deliberations concerning the Transaction, including the following (not necessarily in order of relative importance):

 

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Risks of Failure to Complete the Transaction: The Intuit Board considered the risk that the Transaction may not be completed despite the parties’ efforts, including the possibility that the conditions to the parties’ obligations to complete the Transaction (which include certain conditions that are not within the control of the parties to the Merger Agreement) may not be satisfied or that completion of the Transaction may be unduly delayed, and any resulting adverse impacts on Intuit, its business and the trading price of Intuit Common Stock.

 

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Risks Relating to Governmental Approvals or Imposition of Conditions: The Intuit Board considered the risk that regulatory agencies may object to and challenge the Transaction or may impose terms and conditions, including operational restrictions or the requirement to effect certain divestitures of the assets and businesses of Intuit or Credit Karma, in order to resolve those objections that may adversely affect the anticipated operations and financial results of Intuit, and that as a result the Transaction might not be completed in a timely manner, without the imposition of restrictions or requirements, or at all. See “The Merger Agreement—Regulatory Approvals; Efforts to Complete the Transaction” beginning on page 104 of this consent solicitation statement/prospectus.

 

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Risks Relating to Termination Fees: The Intuit Board considered the circumstances under which the Merger Agreement could be terminated and the impact of such a termination, including the requirement that Intuit pay a termination fee to Credit Karma ranging from $230 to $350 million if Intuit or Credit Karma terminates the Merger Agreement under certain circumstances related to the failure to obtain regulatory approval under the HSR Act prior to 11:59 p.m. Pacific Time, on December 24, 2020 (and such date is not extended pursuant to the terms of the Merger Agreement) or the existence of any order arising under antitrust laws that has become final and non-appealable and restrains, enjoins or otherwise prohibits the consummation of the Transaction. For more information, see “The Merger Agreement—Termination of the Merger Agreement” and “The Merger Agreement—Expenses and Termination Fees” beginning on pages 111 and 112, respectively, of this consent solicitation statement/prospectus.

 

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Risks Relating to Integration: The Intuit Board considered the difficulties and management challenges inherent in completing the Transaction and integrating over time the businesses, operations and workforce of Credit Karma with those of Intuit, particularly in light of Credit Karma’s size, potential time commitment, distractions and other factors, including the challenge of blending separate corporate cultures, harmonizing compensation philosophies, employee compensation and benefit plans, and the potential loss of key personnel, customers and suppliers prior to and following the Transaction.

 

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Risks Relating to the Benefits of the Transaction: The Intuit Board considered the risk that the anticipated cost savings, synergies, enhanced revenue opportunities and other benefits expected as a result of the Transaction may be more difficult to realize or may take longer to realize than anticipated, and that Intuit or Credit Karma may not achieve their financial projections and that general economic and market conditions outside of the control of the parties to the Merger Agreement could deteriorate.

 

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Costs of the Transaction: The Intuit Board considered the substantial costs to be incurred in connection with the Transaction and the integration of Credit Karma’s business into Intuit, including the increased debt to be incurred by Intuit in connection with the Transaction.

 

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Dilution: The Intuit Board considered the dilution of the ownership interests of Intuit’s current stockholders that would result from the Intuit share issuance, and the fact that existing holders of Credit Karma Capital Stock are expected to own approximately 5.2% of the aggregate number of shares of Intuit Common Stock outstanding as of immediately following the completion of the Transaction.

 

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Other Strategic Alternatives: The Intuit Board considered the risk that the Transaction may limit Intuit’s ability to engage in additional future strategic acquisitions.

 

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Risks Relating to the Credit Karma Board’s Ability to Change its Recommendation: The Intuit Board considered the ability of the Credit Karma Board, under certain circumstances and subject to certain conditions (including the payment to Intuit of a $265 million termination fee if the Merger Agreement is terminated under certain related circumstances), to change the Credit Karma Board’s recommendation in respect of an unsolicited acquisition proposal if the Credit Karma Board determines in good faith after consultation with its outside legal counsel and financial advisor that such acquisition proposal is a superior proposal and that the failure to take such action would constitute a breach of its fiduciary duties. For more information, see “The Merger Agreement—Change of Credit Karma Board’s Recommendation; Superior Proposal,” “The Merger Agreement—Termination of the Merger Agreement” and “The Merger Agreement—Expenses and Termination Fees ” beginning on pages 102, 111 and 112, respectively, of this consent solicitation statement/prospectus.

 

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Other Risks and Uncertainties: The Intuit Board considered various other risks associated with the Transaction and the businesses of Intuit and Credit Karma, following the Transaction as described under “Risk Factors,” beginning on page 24 of this consent solicitation statement/prospectus.

The Intuit Board determined that the benefits expected to be achieved for Intuit as a result of the Transaction outweighed these potential risks and uncertainties. The Intuit Board recognized that there can be no assurance of future results, including results considered or expected as disclosed in this section of the consent solicitation statement/prospectus.

The above discussion of the material factors considered by the Intuit Board in its consideration of the Intuit share issuance, the Merger Agreement and the Transaction is not intended to be exhaustive, but rather to set forth the principal factors considered by the Intuit Board. In light of the number and wide variety of factors considered in connection with the evaluation of the Merger Agreement and the Transaction, the Intuit Board did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative weights to the specific factors it considered in reaching its final decision. The Intuit Board based its position on the information available to it and the factors presented to and considered by it. However, some directors may individually have given different weight to different factors. The factors, potential risks and uncertainties contained in this explanation of Intuit’s reasons for the Transaction and other information presented in this section contain information that is forward-looking in nature and, therefore, should be read in light of the factors discussed in “Special Note Regarding Forward-Looking Statements” beginning on page 65 of this consent solicitation statement/prospectus.

 

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The Credit Karma Board’s Reasons for the Transaction

At a meeting held on February 24, 2020, the Credit Karma Board unanimously determined that the Merger Agreement and the Transaction are in the best interests of, and fair to, Credit Karma and its stockholders. In evaluating and ultimately approving the Transaction, the Credit Karma Board, in consultation with Credit Karma management and Credit Karma’s financial and legal advisors, engaged in numerous discussions regarding the Transaction, held meetings, received materials for their review and consideration, and considered a variety of factors, including the significant factors listed below in support of the decision (which are not in any relative order of importance):

 

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the opportunity to combine Intuit’s and Credit Karma’s complementary product portfolios into a powerful delivery platform for user-friendly and transparent personal finance solutions;

 

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the products and development capabilities of Credit Karma and Intuit are complementary, and should enable the combined company to offer broader product value to customers of both companies, beyond what either company could offer on its own;

 

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the fact that the consideration proposed by Intuit reflected extensive negotiations between the parties and their respective advisors, and the Credit Karma Board’s belief that the agreed merger consideration represented the best proposal and economic value available to Credit Karma stockholders, based upon an overall assessment of the net present value of the risk-adjusted returns that are likely to accrue to stockholders over the long term;

 

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the fact that the stock component of the merger consideration offers Credit Karma stockholders an opportunity to participate in the potential for earnings per share accretion and potential synergies created by the Transaction;

 

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the fact that the cash component of the merger consideration offers Credit Karma stockholders an opportunity to realize immediate value, upon the closing, for a portion of their investment and providing a level of price certainty, liquidity and downside protection for such portion;

 

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the expectation that the Transaction will result in greater long-term stockholder value than the potential for earnings per share accretion that might result from other alternatives available to Credit Karma, including seeking an alternative transaction with another third party, remaining an independent private company or pursuing an initial public offering or direct listing, in each case, considering the potential for Credit Karma stockholders to share in any future earnings growth of Credit Karma’s businesses and the overall assessment of the net present value of the risk-adjusted returns that are likely to accrue to stockholders over the long term;

 

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the Credit Karma Board’s familiarity with, and understanding of, Credit Karma’s business, assets, financial condition, results of operations, current business strategy, competitive position, prospects and the risks facing Credit Karma;

 

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information and discussions with Credit Karma’s management and advisors regarding Intuit’s business, assets, financial condition, results of operations, current business strategy, competitive position and prospects, including the expected pro forma effect of the Transaction on the combined company;

 

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the fact that Credit Karma conducted a thorough process to explore Credit Karma’s strategic alternatives during which Credit Karma explored the possibility of pursuing an initial public offering as well as a direct listing;

 

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the financial advice provided by Goldman Sachs & Co. LLC;

 

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the fact that the Credit Karma Board was aware that they had no obligation to recommend any potential transaction and that the Credit Karma Board had the authority to “say no” to any proposals made by Intuit as to a potential transaction;

 

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the review by the Credit Karma Board with its legal and financial advisors, as applicable, of the structure of the Transaction and the financial and other terms of the Merger Agreement and related documents;

 

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the nature of the closing conditions included in the Merger Agreement, including the Credit Karma stockholder approval and government approvals having been obtained, the effectiveness of the Registration Statement, the listing on the Nasdaq of shares of Intuit Common Stock to be issued as stock consideration in the Transaction, the absence of litigation seeking to prevent the Transaction, the absence of a material adverse effect on Credit Karma or Intuit, the accuracy of the parties’ representations and warranties in the Merger Agreement, the performance of the parties’ covenants in all material respects, and the receipt of legal opinions as to the tax treatment of the Mergers, as well as the likelihood of satisfaction of all of the conditions to the completion of the Transaction;

 

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the obligation of the parties to use reasonable best efforts to obtain approvals or clearances from the applicable antitrust and competition authorities, and Intuit’s obligation to pay a termination fee to Credit Karma in the event that the Merger Agreement is terminated based on the failure to receive any required antitrust clearance in the United States (as more fully described in the section entitled “The Merger Agreement—Expenses and Termination Fees” beginning on page 112 of this consent solicitation statement/prospectus);

 

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the fact that Intuit’s obligations pursuant to the Merger Agreement are not subject to any financing condition or similar contingency based on Intuit’s ability to obtain financing, and that Credit Karma would be entitled to specifically enforce the Merger Agreement, including the obligations of Intuit to consummate the Transaction, regardless of the availability or terms of Intuit’s financing;

 

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Credit Karma’s right to engage in negotiations with, and provide information to, a third party that makes an unsolicited proposal relating to an alternative transaction, if the Credit Karma Board determines in good faith after consultation with its financial advisors and outside legal counsel that (i) such proposal is, or is reasonably likely to lead to, a superior proposal and (ii) failure to take such action would be a breach of its directors’ fiduciary obligations, subject to certain conditions (including providing notice to Intuit) (as more fully described in the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals” beginning on page 101 of this consent solicitation statement/prospectus);

 

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the right of the Credit Karma Board to change its recommendation in favor of the approval of the Merger Agreement, prior to obtaining the Credit Karma stockholder vote, with respect to a superior proposal if it has determined, in good faith, after consultation with its financial advisors and outside legal counsel, that the failure to take such action would be a breach of its directors’ fiduciary obligations, subject to certain conditions (including providing notice to Intuit and taking into account any modifications to the terms of the Transaction that are proposed by Intuit) (as more fully described in the section entitled “The Merger Agreement—Change of Credit Karma Board’s Recommendation; Superior Proposal” beginning on page 102 of this consent solicitation statement/prospectus), subject to payment of a termination fee if Intuit terminates the Merger Agreement as a result of such recommendation change (as more fully described in the section entitled “The Merger Agreement—Expenses and Termination Fees” beginning on page 112 of this consent solicitation statement/prospectus);

 

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the fact that certain significant stockholders of Credit Karma (constituting the Requisite Stockholder Approval under the Merger Agreement) have signed Support Agreements obligating such stockholders to vote their Credit Karma shares in favor of the approval of the Transaction, the Merger Agreement and the principal terms thereof and against any alternative acquisition proposals until termination of the Support Agreements, which occurs automatically upon the earliest of certain conditions, including the effective date of the Transaction, termination of the Merger Agreement or any amendment to the Merger Agreement that purports to reduce the consideration to be paid in the Transaction or increases the liability of such stockholder (as more fully described in the section entitled “Ancillary Agreements—Support Agreements” beginning on page 115 of this consent solicitation statement/prospectus);

 

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the right of Credit Karma and Intuit to specific performance to prevent breaches and to enforce the Merger Agreement (as more fully described in the section entitled “The Merger Agreement—Specific Performance” beginning on page 114 of this consent solicitation statement/prospectus);

 

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the availability of appraisal and/or dissenters’ rights for the Credit Karma stockholders who oppose adoption of the Merger Agreement and strictly comply with the procedures prescribed by Delaware and/or California law, as applicable;

 

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the customary nature of the other representations, warranties and covenants of Credit Karma in the Merger Agreement; and

 

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the requirement that Credit Karma or Intuit pay a termination fee to the other party under certain circumstances specified in the Merger Agreement (as more fully described in the section entitled “The Merger Agreement—Expenses and Termination Fees” beginning on page 112 of this consent solicitation statement/prospectus).

In the course of their deliberations, the Credit Karma Board also considered a variety of risks and other potentially negative factors, including the following (which are not in any relative order of importance):

 

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the possibility that the Transaction may not be completed or that completion may be unduly delayed for reasons beyond the control of Credit Karma and/or Intuit, including the potential length of the regulatory review process and the risk that applicable antitrust and competition authorities may prohibit or enjoin the Transaction or otherwise impose conditions on Credit Karma and/or Intuit in order to obtain clearance for the Transaction;

 

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the fact that the exchange ratio is fixed with respect to the stock component of the merger consideration, indicating that Credit Karma stockholders could be adversely affected by a decrease in the trading price of Intuit Common Stock during the pendency of the Transaction and the fact that the Merger Agreement does not provide Credit Karma with a price-based termination right or other similar protection in favor of Credit Karma or its stockholders (other than the cash component of the merger consideration);

 

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the potential for diversion of management and employee attention and for increased employee attrition during the period prior to completion of the Transaction, and the potential effect of the Transaction on Credit Karma’s business and relations with customers, suppliers and strategic partners;

 

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the restrictions on the conduct of Credit Karma’s business prior to completion of the Transaction, requiring Credit Karma to use its reasonable best efforts to conduct its business in the ordinary course consistent with past practice, subject to specific limitations, which could delay or prevent Credit Karma from undertaking business opportunities that may arise pending completion of the Transaction and could negatively impact Credit Karma’s ability to attract and retain employees and decisions of customers, suppliers and strategic partners;

 

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the difficulty inherent in integrating the businesses, assets and workforces of the two companies and the risk that anticipated strategic and other benefits to Credit Karma and Intuit following completion of the Transaction, including any expected synergies, will not be realized or will take longer to realize than expected;

 

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the transaction costs and retention costs to be incurred in connection with the Transaction, regardless of whether the Transaction is completed;

 

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the fact that the Merger Agreement includes significant restrictions on the ability of Credit Karma to solicit proposals for alternative transactions or engage in discussions regarding such proposals, subject to exceptions and termination provisions, which in some cases requires payment of a termination fee by Credit Karma (as more fully described in the sections entitled “The Merger Agreement—No Solicitation of Acquisition Proposals” and “The Merger Agreement—Change of Credit Karma Board’s Recommendation; Superior Proposal” beginning on pages 101 and 102, respectively, of this consent solicitation statement/prospectus), which could have the effect of discouraging such proposals from being made or pursued;

 

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the risk that if Credit Karma stockholders fail to timely approve the Transaction, then Intuit may terminate the Merger Agreement;

 

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the risk that holders of more than 2% of Credit Karma’s capital stock will have exercised, or will remain entitled to exercise, appraisal or dissenters rights in connection with the Transaction, in which case Intuit could refuse to consummate the Transaction;

 

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the fact that if the Transaction is not completed, Credit Karma will have expended significant human and financial resources on a failed transaction, and may also be required to pay a termination fee under certain circumstances (as more fully described in the section entitled “The Merger Agreement—Expenses and Termination Fees” beginning on page 112 of this consent solicitation statement/prospectus); and

 

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various other risks associated with the Transaction and the business of Credit Karma and the combined company described in the sections entitled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” beginning on pages 24 and 65, respectively, of this consent solicitation statement/prospectus.

In addition to considering the factors described above, the Credit Karma Board considered the fact that some of Credit Karma’s directors and executive officers have other interests in the Transaction that are different from, or in addition to, the interests of Credit Karma stockholders generally, as more fully described in the section entitled “Interests of Affiliates in the Transaction—Interests of Directors and Executive Officers of Credit Karma in the Transaction” beginning on page 141 of this consent solicitation statement/prospectus.

Each of the Credit Karma Board concluded that the potentially negative factors associated with the Transaction were outweighed by the potential benefits that it expected Credit Karma and its stockholders would achieve as a result of entering into the Transaction. Accordingly, the Credit Karma Board determined that the Transaction were in the best interests of, and fair to, Credit Karma and its stockholders.

The foregoing discussion of the factors considered by the Credit Karma Board is not intended to be exhaustive, but, rather, includes certain illustrative material factors considered by the Credit Karma Board. In view of the wide variety of factors considered by the Credit Karma Board in connection with its evaluation of the Transaction and the complexity of these matters, in reaching their decisions to approve the Transaction, the Credit Karma Board did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors and/or considered other factors altogether. The Credit Karma Board considered each of the applicable factors as a whole in context of the Transaction, including with the use of thorough discussions with, and questioning of, Credit Karma management and Credit Karma’s financial and legal advisors, and overall considered such factors to be favorable to, and to support, their determination. In considering the factors described above and any other factors, individual members of the Credit Karma Board may have viewed factors differently or given different weight or merit to different factors.

This discussion of Credit Karma’s reasons for the Transaction is forward-looking in nature and involves risks and uncertainties that could result in the expectations contained in such forward-looking statements not to occur, including those risks and uncertainties discussed in the sections entitled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” beginning on pages 65 and 24, respectively, of this consent solicitation statement/prospectus, which sections should be read in conjunction with this discussion of the Credit Karma Board’s reasons for the Transaction.

Regulatory Approvals

Intuit, Merger Subs and Credit Karma are required to submit notifications to various authorities prior to completing the Transaction. Under the HSR Act, Intuit, Merger Subs and Credit Karma must file notifications with the FTC and the Antitrust Division of the DOJ and observe a mandatory pre-merger waiting period (and any extensions thereof) before completing the Transaction. After the expiration of the initial waiting period, the Antitrust Division of the DOJ or the FTC may issue a Request for Additional Information and Documentary Material, which is referred to in this

 

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document as a “Second Request.” If a Second Request is issued, the parties may not complete the Transaction until they substantially comply with the Second Request and observe a second 30-calendar-day waiting period, unless the waiting period is terminated earlier. On March 9, 2020, Intuit, Merger Subs and Credit Karma filed their respective Notification and Report Forms with the FTC and the Antitrust Division of the DOJ. On April 8, 2020, each of Intuit and Credit Karma received a Second Request from the Antitrust Division of the DOJ relating to the Transaction. The effect of this request, which was issued under the HSR Act, is to extend the waiting period imposed by the HSR Act until 30 days after each of Intuit and Credit Karma has certified substantial compliance with the applicable request, unless the period is extended voluntarily by the parties or terminated earlier by the DOJ.

Although Intuit, Merger Subs and Credit Karma expect to obtain all required regulatory clearances to complete the Transaction, Intuit and Credit Karma cannot provide any assurances that the antitrust regulators or other government agencies, including private parties or additional state attorneys general, will not initiate actions to challenge the Transaction before or after they are completed. Any such challenge to the Transaction could result in an administrative or court order enjoining the Transaction or in restrictions or conditions that would have a material adverse effect on Intuit or the Surviving Company after completion of the Transaction. Such restrictions and conditions could include requiring the divestiture or spin-off of certain businesses, assets or products, the licensing of intellectual property rights, and the imposition of limitations on the ability of Credit Karma, as a condition to completion of the Transaction, to operate its business as it sees fit. Neither Intuit nor Credit Karma can provide assurance that any such conditions, terms, obligations or restrictions will not result in the delay or abandonment of the Transaction.

In connection with the Transaction, the parties also intend to make all required filings with the FCA, the SEC, the FTC, the Delaware Secretary of State and the Nasdaq, as well as any required filings with state or local licensing authorities.

No Intuit Stockholder Approval Required

The approval of the Merger Agreement and the Transaction by Intuit does not require the affirmative vote or consent of Intuit stockholders.

Written Consent of the Holders of Credit Karma Capital Stock

The approval of the Merger Agreement and the Transaction require the Requisite Stockholder Approval. No later than two business days after the registration statement of which this consent solicitation statement/prospectus forms a part of is declared effective by the SEC, Credit Karma is required to distribute the Written Consent in lieu of a meeting pursuant to Section 228 of the DGCL to at least the number of Credit Karma stockholders sufficient for the Requisite Stockholder Approval (and, in any event, to all signatories of a Support Agreement), requesting the adoption and approval of the Merger Agreement and the Transaction. Notwithstanding the foregoing, Credit Karma will send out and seek the Written Consent of all Credit Karma stockholders to adopt and approve the Merger Agreement proposal.

Under the Merger Agreement, Credit Karma agreed to use reasonable best efforts to cause the Credit Karma stockholders sufficient for the Requisite Stockholder Approval to execute and deliver the Written Consent within 72 hours of the delivery of the Written Consent to the Credit Karma stockholders. The delivery of the Written Consents by the Credit Karma stockholders sufficient for the Requisite Stockholder Approval will constitute the adoption and approval of the Merger Agreement and the Transaction and such approval is a condition to the Closing. In the event of a failure by the Credit Karma stockholders sufficient for the Requisite Stockholder Approval to deliver Written Consents within such time, Intuit would have the right to terminate the Merger Agreement under certain circumstances.

In connection with the execution of the Merger Agreement, certain significant Credit Karma stockholders constituting the Requisite Stockholder Approval under the Merger Agreement entered into Support Agreements obligating such stockholders to vote their Credit Karma shares in favor of the approval of the Transaction, the Merger Agreement and the principal terms thereof and against any alternative acquisition proposals. The Support Agreements will terminate automatically upon the earliest of certain conditions, including (i) the effective date of the Transaction, (ii) termination of the Merger Agreement or (iii) any amendment to the Merger Agreement that purports to reduce the consideration to be paid in the

 

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Transaction or increases the liability of such stockholder. See “Ancillary Agreement—Support Agreements” beginning on page 115 of this consent solicitation statement/prospectus. Therefore, under the Support Agreements, Credit Karma expects to receive Written Consents representing a sufficient number of Credit Karma shares to satisfy the stockholder approval requirement described above.

Indemnification

The Credit Karma equityholders who receive any portion of the aggregate merger consideration at closing (the “Indemnitors”) will indemnify (on a several and not joint basis based on their pro rata portion of the aggregate merger consideration) Intuit for (i) any breach of Credit Karma’s representations and warranties, (ii) any breach of Credit Karma’s or the securityholder representative’s covenants, (iii) any inaccuracy in any information set forth in the consideration spreadsheet, (iv) any closing indebtedness or unpaid Credit Karma transaction expenses to the extent not accounted for in the final determination of the aggregate merger consideration, (v) certain amounts incurred in connection with the exercise of dissenters’ rights or rights of appraisal related to the Transaction by any holder or former holder of Credit Karma Capital Stock, (vi) any claims or threatened claims by any holder or former holder of Credit Karma Capital Stock or any claims or threatened claims alleging violations of fiduciary duty by any current or former member of the Credit Karma Board or officers of Credit Karma, (vii) claims by current or former officers, directors or managers of Credit Karma or any of its subsidiaries involving a right to indemnification or reimbursement of expenses that existed at or prior to the effective time of the Transaction in their capacity as an officer, director or manager and (iv) certain liabilities with respect to taxes.

Credit Karma’s fundamental representations and warranties and the tax representations and warranties under the Merger Agreement survive until the third anniversary of the closing date, and all other representations and warranties made by Credit Karma in the Merger Agreement survive until the first anniversary of the closing date (the “General Expiration Date”). Fundamental representations include corporate existence and power, corporate authorization, capitalization, takeover statutes and finders’ fees.

The indemnification provisions of the Merger Agreement are Intuit’s sole and exclusive remedy following the closing arising from or relating to the Merger Agreement or the Transaction, except for claims against a particular Indemnitor in the case of fraud by Credit Karma with respect to any representation or warranty made by Credit Karma in the Merger Agreement or the closing certificate executed by Credit Karma at closing with respect to which the Indemnitor had actual knowledge or willingly participated in the commission of such fraud or willful breach.

For more information, see “The Merger Agreement—Indemnification” beginning on page 110 of this consent solicitation statement/prospectus.

Listing of Intuit Common Stock

Intuit expects to obtain approval to list the shares of Intuit Common Stock to be issued pursuant to the Merger Agreement on the Nasdaq, which approval is a condition to the closing. Accordingly, application will be made to have the shares of Intuit Common Stock to be issued pursuant to the Merger Agreement approved for listing on the Nasdaq, where shares of Intuit Common Stock are currently traded under the symbol “INTU.”

Appraisal and Dissenters’ Rights

Pursuant to Section 262 of the DGCL and Chapter 13 of the CCC (if deemed applicable to the Transaction by virtue of Section 2115 of the CCC), Credit Karma stockholders who do not deliver the Written Consent in favor of adoption of the Merger Agreement, who continuously hold their shares of Credit Karma Capital Stock through the effective time of the Transaction and who otherwise comply precisely with the applicable requirements of Section 262 of the DGCL and Chapter 13 of the CCC, as applicable, have the right to seek appraisal of the fair value of their shares of Credit Karma Capital Stock, as determined by the Delaware Court of Chancery or applicable California superior court, respectively, if the First Merger is completed. The “fair value” of shares of Credit Karma Capital Stock as determined by the Delaware Court of Chancery or applicable California superior court could be greater than, the same as, or less than the value of the per share merger consideration that a Credit Karma stockholder would otherwise be entitled to receive under the terms of the Merger Agreement.

 

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Credit Karma stockholders who wish to exercise the right to seek an appraisal of their shares must so advise Credit Karma by submitting a written demand for appraisal in the form described in the Stockholder Notice that Credit Karma will prepare and mail to any Credit Karma stockholders that do not execute and return the Written Consent prior to the effective time of the Transaction, and must otherwise follow precisely the procedures prescribed by Section 262 of the DGCL or Chapter 13 of the CCC, as applicable. A person having a beneficial interest in shares of Credit Karma Capital Stock held of record in the name of another person, such as a nominee or intermediary, must act promptly to cause the record holder to follow the steps summarized in the Stockholder Notice and in a timely manner to perfect appraisal or dissenters’ rights. In view of the complexity of Section 262 of the DGCL and Chapter 13 of the CCC, Credit Karma stockholders that may wish to pursue appraisal or dissenters’ rights should consult their legal and financial advisors.

A condition on the obligations of Intuit and Merger Subs to consummate the Transaction is that Credit Karma stockholders holding no more than two percent of the outstanding shares of Credit Karma Capital Stock (calculated on an as-converted to Credit Karma Common Stock basis) may have exercised or remain entitled to exercise appraisal or dissenters’ rights pursuant to the DGCL or CCC with respect to such shares of Credit Karma Capital Stock.

Tax Treatment of the Mergers

The Mergers, taken together, are intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. It is a condition to the completion of the Mergers that each of Intuit and Credit Karma receive an opinion from their respective counsel to the effect that the Mergers, taken together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Each such opinion will be based on, among other things, certain facts, representations, covenants and assumptions, all of which must be consistent with the state of facts existing at the time of the Mergers. If any of these facts, representations, covenants and assumptions are, or become, inaccurate or incomplete, each such opinion may be invalid, and the conclusions reached therein could be jeopardized. An opinion of counsel represents counsel’s best legal judgment and is not binding on the IRS or the courts, which may not agree with the conclusions set forth in such opinion.

No ruling has been, or will be, sought by Credit Karma or Intuit from the IRS with respect to the Mergers and there can be no assurance that the IRS will not challenge the qualification of the Mergers, taken together, as a “reorganization” under Section 368(a) of the Code or that a court would not sustain such a challenge. If the IRS successfully challenges the reorganization status of the Mergers, U.S. Holders will be treated as if they sold their Credit Karma Common Stock in a fully taxable transaction.

Accounting Treatment of the Mergers

Intuit and Credit Karma prepare their financial statements in accordance with GAAP. The Mergers will be accounted for in accordance with FASB ASC Topic 805, Business Combinations, with Intuit considered as the accounting acquirer and Credit Karma as the accounting acquiree. Accordingly, consideration to be given by Intuit to complete the Mergers with Credit Karma will be allocated to the identifiable tangible and intangible assets acquired and liabilities assumed of Credit Karma based on their estimated fair values as of the date of the completion of the Mergers, with any excess merger consideration being recorded as goodwill.

 

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THE MERGER AGREEMENT

The following section summarizes material provisions of the Merger Agreement, which is included in this consent solicitation statement/prospectus as Annex A and is incorporated by reference herein in its entirety. The summary of the material provisions of the Merger Agreement below and elsewhere in this consent solicitation statement/prospectus is qualified in its entirety by reference to the Merger Agreement. This summary does not purport to be complete and may not contain all of the information about the Merger Agreement that is important to you. The rights and obligations of Intuit and Credit Karma are governed by the Merger Agreement and not by this summary or any other information contained in or incorporated by reference into this consent solicitation statement/prospectus. Intuit stockholders and Credit Karma stockholders are urged to read the Merger Agreement carefully and in its entirety, as well as this consent solicitation statement/prospectus and the information incorporated by reference into this consent solicitation statement/prospectus, before making any decisions regarding the Merger Agreement and the Transaction.

Explanatory Note Regarding the Merger Agreement

The Merger Agreement is included in this consent solicitation statement/prospectus as Annex A and described in this summary to provide you with information regarding its terms. The Merger Agreement contains representations and warranties by Credit Karma, on the one hand, and by Intuit and the Merger Subs, on the other hand, which were made solely for the benefit of the other parties for purposes of the Merger Agreement. The representations, warranties and covenants made in the Merger Agreement by Credit Karma, Intuit and the Merger Subs were qualified and subject to important limitations agreed to by Credit Karma, Intuit and the Merger Subs in connection with negotiating the terms of the Merger Agreement. In particular, in your review of the representations and warranties contained in the Merger Agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purpose of establishing circumstances in which a party to the Merger Agreement may have the right not to consummate the Transaction if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the Merger Agreement, rather than establishing matters as facts about Credit Karma or Intuit or any other person at the time they were made or otherwise. The representations and warranties also may be subject to a contractual standard of materiality different from that generally applicable to stockholders and reports and documents filed with the SEC and were qualified by the matters contained in the confidential disclosure schedules that Credit Karma and Intuit each delivered in connection with the Merger Agreement and certain documents filed with the SEC. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this consent solicitation statement/prospectus, may have changed since the date of the Merger Agreement. Accordingly, the representations and warranties and other provisions of the Merger Agreement should not be read alone, but instead should be read together with the information provided elsewhere in this consent solicitation statement/prospectus and in the documents incorporated by reference into this consent solicitation statement/prospectus. See “Where You Can Find More Information” beginning on page 177 of this consent solicitation statement/prospectus.

The Transaction

The Merger Agreement provides, among other matters, for the acquisition of Credit Karma pursuant to two successive mergers, on the terms and subject to the conditions in the Merger Agreement and in accordance with the DGCL and the DLLCA. At the effective time of the Transaction, Merger Sub I will be merged with and into Credit Karma, with Credit Karma continuing as the Surviving Corporation in the First Merger and as a wholly owned subsidiary of Intuit. Immediately following the First Merger, Credit Karma, as the Surviving Corporation of the First Merger, will merge with and into Merger Sub II, with Merger Sub II continuing as the Surviving Company in the Second Merger and as a wholly owned subsidiary of Intuit.

From and after the effective time of the Second Merger, all of the rights, privileges, powers, franchises, properties, liabilities, duties and debts previously in the name of and owned by, belonging to, and owed and owing to Credit Karma, as the Surviving Corporation in the First Merger, will be in the name of and owned by, belong to, and be owed and owning to, the Surviving Company.

At the effective time of the First Merger, the certificate of incorporation and bylaws of the Surviving Corporation will be amended to be identical to the certificate of incorporation and bylaws of Merger Sub I (except that the name of the Surviving Corporation will not be changed), as in

 

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effect immediately prior to the effective time of the First Merger. In addition, from and after the effective time of the First Merger and before the effective time of the Second Merger, the directors and officers of Merger Sub I serving in such position immediately prior to the effective time of the First Merger will become the directors and officers, respectively, of the Surviving Corporation.

At the effective time of the Second Merger, the certificate of formation and limited liability company agreement of Merger Sub II, as in effect immediately prior to the effective time of the Second Merger, will be the certificate of formation and limited liability company agreement, respectively, of the Surviving Company, until thereafter amended in accordance with applicable law, and the managers and officers of Merger Sub II serving in such position immediately prior to the effective time of the Second Merger will become the managers and officers of the Surviving Company.

Closing; Effective Time

The Merger Agreement provides that, unless another date is agreed to in writing by Intuit and Credit Karma, the closing will take place no later than the fifth business day after the satisfaction or waiver of the conditions to closing (other than such conditions that by their nature are to be satisfied at the closing, but subject to the satisfaction or permitted waiver of such conditions at the closing). However, without Intuit’s prior written consent, the closing may not occur during the last two weeks of a fiscal quarter of Intuit, in which case the closing would take place within two business days following the last date of such Intuit fiscal quarter. The date on which the closing of the Transaction occurs is referred to in this consent solicitation statement/prospectus as the closing date.

On the closing date, the parties will file a certificate of merger with respect to the First Merger, referred to in this consent solicitation statement/prospectus as the first certificate of merger, with the Secretary of State of the State of Delaware. The First Merger will be effective at the time the parties file the first certificate of merger, or such other date and time as are agreed to by the parties and as specified in the first certificate of merger. Later on the closing date, immediately following the effective time of the First Merger, the parties will file a certificate of merger with respect to the Second Merger, referred to in this consent solicitation statement/prospectus as the second certificate of merger, with the Secretary of State of the State of Delaware. The Second Merger will be effective at the time the parties file the second certificate of merger, or such other date and time as are agreed to by the parties and specified in the second certificate of merger.

Merger Consideration; Effect of the Transaction on Capital Stock

At the effective time of the Transaction, each share of Credit Karma Capital Stock issued and outstanding immediately prior to the effective time of the Transaction (except for shares owned by Credit Karma, Intuit, the Merger Subs or any direct or indirect wholly owned subsidiary of Credit Karma or Intuit immediately prior to the effective time of the Transaction) will be converted into the right to receive the per share closing consideration, along with the right to receive certain adjustment amounts and distributions.

Upon the terms and subject to the conditions set forth in the Merger Agreement and subject to certain adjustments described more fully in this consent solicitation statement/prospectus, the per share closing consideration will consist of:

 

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an amount in cash equal to (i) the quotient of the aggregate cash consideration, divided by the Fully Diluted Common Number, minus (ii) 50% of the per share escrow amount; and

 

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a number of shares of Intuit Common Stock equal to (i) the quotient of the aggregate stock consideration, divided by the Fully Diluted Common Number, minus (ii) 50% of the quotient of the per share escrow amount, divided by $299.7306 (an amount calculated using Intuit Common Stock’s daily volume-weighted average sales price per share prior to the signing of the Merger Agreement).

Also at the effective time of the Transaction, each share of Credit Karma Capital Stock issued and outstanding immediately prior to the effective time of the Transaction that is owned by Credit Karma, Intuit, the Merger Subs or any direct or indirect wholly owned subsidiary of Credit Karma or Intuit immediately prior to the effective time of the Transaction will be canceled and extinguished without any conversion thereof.

 

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Each share of common stock of Merger Sub I issued and outstanding immediately prior to the effective time of the First Merger will be converted into, and exchanged for, one newly and validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation following the First Merger (and the shares of the Surviving Corporation into which the shares of common stock of Merger Sub I are so converted will be the only shares of the Surviving Corporation’s common stock that are issued and outstanding immediately after the effective time of the First Merger).

At the effective time of the Second Merger, each limited liability company interest of Merger Sub II issued and outstanding immediately prior to the effective time of the Second Merger will remain outstanding as a limited liability company interest of the Surviving Company and all shares of the Surviving Corporation’s common stock will no longer be outstanding and will automatically be canceled and will cease to exist without any consideration being payable therefor.

Treatment of Credit Karma Equity Awards

At the effective time of the Transaction:

 

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each vested Credit Karma Option that is outstanding as of immediately prior to the effective time of the Transaction and has an exercise price per share that is less than the per share consideration value, will be canceled and extinguished and converted into (i) the right to receive the option per share closing consideration, multiplied by the number of shares of Credit Karma Common Stock underlying the vested Credit Karma Option and (ii) the right to receive certain adjustment amounts and holdback distributions (in each case, less applicable withholding taxes);

 

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each unvested Credit Karma Option that is outstanding as of immediately prior to the effective time of the Transaction and has an exercise price per share that is less than the per share consideration value, will, except as provided below, be assumed by Intuit and converted into an Assumed Option covering Intuit Common Stock. Following the effective time of the Transaction, each such Assumed Option will continue to have, and be subject to, the same terms and conditions set forth in the applicable Credit Karma Option documents, except that (i) each such Assumed Option will be exercisable for a number of whole shares of Intuit Common Stock equal to the product of the number of unvested shares of Credit Karma Common Stock that were subject to such Credit Karma Option immediately prior to the effective time of the Transaction multiplied by the Conversion Ratio, rounded down to the nearest whole share of Intuit Common Stock, and (ii) the per share exercise price for the shares of Intuit Common Stock issuable upon exercise of such Assumed Option will be equal to the quotient determined by dividing the exercise price per share of Credit Karma Common Stock at which such Credit Karma Option was exercisable immediately prior to the effective time of the Transaction by such ratio, rounded up to the nearest whole cent;

 

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each Credit Karma Option outstanding as of immediately prior to the effective time of the Transaction that has an exercise price per share that is equal to or greater than the per share consideration value will be canceled and extinguished as of immediately prior to the effective time of the Transaction without any payment or consideration therefor. In addition, (i) each Credit Karma Option held by a non-employee director or former non-employee director, if any, of Credit Karma or its subsidiaries, will be canceled and extinguished at the effective time of the Transaction and the holder thereof will be paid the consideration (if any) described above in connection with such cancellation and extinguishment, and (ii) each Credit Karma Option held by a consultant or former consultant, if any, of Credit Karma or its subsidiaries, will be canceled and extinguished at the effective time of the Transaction and, if such Credit Karma Option is vested, the holder thereof will be paid the consideration described above in connection with such cancellation and extinguishment;

 

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each vested Credit Karma RSU that is outstanding as of immediately prior to the effective time of the Transaction will be canceled and extinguished and the holder of such vested Credit Karma RSU will, subject to applicable withholding taxes, be entitled to receive the per share closing consideration and the right to receive certain adjustments and distributions;

 

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each award of unvested Credit Karma RSUs that is outstanding as of immediately prior to the effective time of the Transaction will, except as provided below, be assumed by Intuit and converted into an award of Assumed RSUs covering Intuit Common Stock. Following the effective time of the Transaction, each such Assumed RSU award will continue to have, and be subject to, the same terms and conditions set forth in the applicable Credit Karma RSU award documents, except that each such Assumed RSU award will cover a number of whole shares of Intuit Common Stock equal to the product of the number of shares of Credit Karma Common Stock that were subject to such unvested Credit Karma RSU award immediately prior to the effective time of the Transaction, multiplied by the Conversion Ratio, rounded down to the nearest whole number of shares of Intuit Common Stock; and

 

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each Credit Karma RSU held by a non-employee director or former non-employee director, if any, of Credit Karma or its subsidiaries, will be canceled and extinguished at the effective time of the Transaction and the holder thereof will be paid the consideration described above in connection with such cancellation and extinguishment. Each Credit Karma RSU held by a consultant or former consultant, if any, of Credit Karma or its subsidiaries will be canceled and extinguished at the effective time of the Transaction and, if such Credit Karma RSU is vested, the holder thereof will be paid the consideration described above in connection with such cancellation and extinguishment.

In this consent solicitation statement/prospectus, the terms “per share consideration value,” “net option per share value,” “option per share closing cash consideration,” “option per share closing stock consideration” and “option per share closing consideration” are defined as follows:

 

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the “per share consideration value” means an amount equal to the quotient of (i) the aggregate merger consideration, divided by (ii) the Fully Diluted Common Number;

 

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the “net option per share value” means, with respect to any vested in-the-money Credit Karma Option, an amount equal to (i) the per share consideration value, minus (ii) the exercise price per share of such vested Credit Karma Option;

 

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the “option per share closing cash consideration” means, with respect to any share of Credit Karma Common Stock underlying a vested in-the-money Credit Karma Option, an amount in cash equal to (i) one-half of the net option per share value, minus (ii) 50% of the per share escrow amount;

 

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the “option per share closing stock consideration” means, with respect to any share of Credit Karma Common Stock underlying a vested in-the-money Credit Karma Option, a number of shares of Intuit Common Stock equal to (i) the quotient of one-half of the net option per share value, divided by $299.7306 minus (ii) 50% of the quotient of the per share escrow amount, divided by $299.7306; and

 

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the “option per share closing consideration” means, with respect to any vested in-the-money Credit Karma Option, (i) a number of shares of Intuit Common Stock equal to the option per share closing stock consideration and (ii) an amount in cash equal to the option per share closing cash consideration.

Merger Consideration Adjustments

Closing Adjustment to Merger Consideration

No later than four business days before the anticipated closing date, Credit Karma must deliver to Intuit a good faith statement setting forth an estimated unaudited consolidated balance sheet of Credit Karma and its subsidiaries as of 12:01 a.m. Pacific Time on the closing date and:

 

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the estimated working capital as of 12:01 a.m. Pacific Time on the closing date, which is referred to in this consent solicitation statement/prospectus as the estimated closing working capital;

 

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the estimated aggregate amount of indebtedness of Credit Karma and its subsidiaries that remains unpaid as of 12:01 a.m. Pacific Time on the closing date, which is referred to in this consent solicitation statement/prospectus as the estimated closing indebtedness;

 

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the estimated aggregate amount of cash, cash equivalents and marketable securities held by Credit Karma or its subsidiaries, subject to certain adjustments, as of 12:01 a.m. Pacific Time on the closing date, which is referred to in this consent solicitation statement/prospectus as the estimated closing cash; and

 

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the estimated aggregate amount of expenses incurred by Credit Karma and its subsidiaries in connection with the Transaction that remain unpaid as of 12:01 a.m. Pacific Time on the closing date, which is referred to in this consent solicitation statement/prospectus as the estimated unpaid Credit Karma transaction expenses.

Post-Closing Adjustment to Merger Consideration

As promptly as reasonably practicable and no later than 90 days after the closing date, Intuit must prepare and deliver to the securityholder representative a closing statement setting forth in reasonable detail Intuit’s proposed calculation and supporting detail of the adjustment amount, consisting of:

 

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the working capital as of 12:01 a.m. Pacific Time on the closing date, which is referred to in this consent solicitation statement/prospectus as the closing working capital;

 

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the aggregate amount of indebtedness of Credit Karma and its subsidiaries that remains unpaid as of 12:01 a.m. Pacific Time on the closing date, which is referred to in this consent solicitation statement/prospectus as the closing indebtedness;

 

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the aggregate amount of cash, cash equivalents and marketable securities held by Credit Karma or its subsidiaries, subject to certain adjustments, as of 12:01 a.m. Pacific Time on the closing date, which is referred to in this consent solicitation statement/prospectus as the closing cash; and

 

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the aggregate amount of expenses incurred by Credit Karma and its subsidiaries in connection with the Transaction that remain unpaid as of 12:01 a.m. Pacific Time on the closing date, which is referred to in this consent solicitation statement/prospectus as the unpaid Credit Karma transaction expenses.

If the securityholder representative disagrees with Intuit’s calculations set forth on the closing statement, Intuit and the securityholder representative will determine the final calculations through a customary dispute resolution process. The final determinations of the closing working capital, closing indebtedness, closing cash and unpaid Credit Karma transaction expenses adjustments will be used to calculate the adjustment amount to the aggregate merger consideration, including the:

 

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post-closing working capital adjustment amount minus the closing working capital adjustment amount; plus

 

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estimated closing indebtedness minus closing indebtedness; plus

 

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closing cash minus estimated closing cash; plus

 

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estimated unpaid Credit Karma transaction expenses minus unpaid Credit Karma transaction expenses.

If the adjustment amount is negative, Intuit and the securityholder representative must promptly instruct the escrow agent to disburse to the Surviving Company from the Indemnity Escrow Fund (i) an amount in cash equal to one-half of the absolute value of the adjustment amount and (ii) a number of shares of Intuit Common Stock equal to the quotient of one-half of the absolute value of the adjustment amount, divided by $299.7306. If the adjustment amount is positive, Intuit must promptly deposit with the exchange agent for disbursement to the Indemnitors on a pro rata basis (i) an amount in cash equal to one-half of the adjustment amount and (ii) a number of shares of Intuit Common Stock equal to the quotient of one-half of the adjustment amount, divided by $299.7306 (other than any such amounts which are payable through the Surviving Company’s or Intuit’s payroll system

 

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